Sigurdsson has been out of action for two months with a knee injury, but the 28-year-old has been given the chance to recover in time for the tournament.
Iceland are heading to their first World Cup, having become the smallest ever nation to qualify, with Sigurdsson among their key players.
But missing from the 23-man selection named by Iceland's coach Heimir Hallgrimsson on Friday is Kolbeinn Sigthorsson.
The forward, one of the stars of Iceland's shock run to the quarter-finals at Euro 2016, is only fit for the reserves list after his last two seasons were ruined by knee injuries.
Iceland's final 23-man World Cup squad:
Hannes Halldorsson (Randers), Runar Runarsson (Nordsjaelland), Frederik Schram (Roskilde); Kari Arnason (Aberdeen), Holmar Eyjolfsson (Levski Sofia), Rurik Gislason (Sandhausen), Sverrir Ingason (Rostov), Hordur Magnusson (Bristol City), Birkir Saevarsson (Valur), Ragnar Sigurdsson (Rostov), Ari Skulason (Lokeren); Birkir Bjarnason (Aston Villa), Samuel Fridjonsson (Valerenga), Johann Gudmundsson (Burnley), Aron Gunnarsson (Cardiff City), Emil Hallfredsson (Udinese), Gylfi Sigurdsson (Everton), Olafur Skulason (Karabukspor), Arnor Traustason (Malmo); Jon Bodvarsson (Reading), Alfred Finnbogason (Augsburg), Albert Gudmundsson (PSV), Bjorn Sigurdarson (Rostov).
Reserve list: Andri Bjarnason (Helsingborgs), Elmar Bjarnason (Elazigspor), Kjartan Finnbogason (Horbens), Jon Fjoluson (Norrkoping), Hjortur Hermannsson (Brondby), Ingvar Jonsson (Sandefjord), Vidar Kjartansson (Maccabi Tel Aviv), Ogmundur Kristinsson (Excelsior), Elias Omarsson (Gothenburg), Kolbeinn Sigthorsson (Nantes), Runar Sigurjonsson (St Gallen, on loan from Grasshoppers), Arnor Smarason (Hammarby).