The British government has granted Iceland a travel exemption to ensure England's Nations League fixture will go ahead at Wembley on November 18.
A new travel ban on non-British visitors arriving from Denmark had left Wednesday's match shrouded in uncertainty, with Iceland set to face the Danes in Copenhagen three days earlier.
The measures have been put in place in an attempt to get the coronavirus infection rate under control.
After the Football Association requested an exemption to allow the game to go ahead, they announced on Twitter that their request had been granted.
"We are pleased to confirm that following discussions with the relevant authorities next Wednesday’s UEFA Nations League fixture against Iceland will go ahead at Wembley Stadium," the statement said.
Media reports had indicated the FA has been exploring the possibility of playing the match in Albania or Germany instead.
Earlier on Thursday, the FA issued a public plea to the country's lawmakers, outlining their agreements with Iceland and emphasising the fact elite footballers are being frequently tested for Covid-19.
The statement read: "We have asked government to consider allowing us to play our final Nations League match at Wembley, by giving travel exemption to the Icelandic team subject to strict medical protocols.
"The Icelandic team will have played Denmark in Copenhagen and therefore would be subject to a travel ban.
"While in Denmark they will have been under strict UEFA protocols in a sporting bubble and will be PCR tested before travelling to England. The PCR test picks up the Cluster 5 variant.
"We have agreed with the Icelandic team that they arrive on private charter to a private terminal and will only have access to their hotel and the stadium.
"We will also put in place additional testing over and above the multiple tests normally required for each participant and staff at the match.
"We are not asking for this support to help us have home advantage in this competitive international match, although of course that would be helpful. We are not asking for this support to avoid a huge cost from playing an England home match in Germany, although we can ill afford the financial penalty at this time.
"The priority must be health, which is why we are asking for this support. We believe it's in the better interests of the England team and support staff to play at Wembley Stadium rather than have international travel at this time - and then play the match under the same UEFA protocols against the same opposition, but in a different country.
"We understand the optics of an exception at a time when industries such as hauliers are not allowed to travel to Denmark. However, international footballers are amongst the most tested people on the planet and we will even conduct extra tests to go beyond the highest standard.
"We ask the government to follow the advice of their public health experts as to whether the match is safe to host in the UK and we believe an exception is justified and in the best interests of the England team."
Ahead of England's final two Nations League Group A2 fixtures, of which the Iceland match is second, England are level on seven points with Denmark, two adrift of leaders Belgium. Iceland have lost all their first four matches.