Starting this year, Bulgarians and Romanians will no longer need to get special residence and work permits to live and work in Iceland, the IceNews website reported.
Those who have residence and work permits will not have to renew them when they expire and people moving to Iceland will only need to register their residence.
Iceland's government announced in November it would ask the Parliament to lift the restrictions on the free movement of Bulgarian and Romanian workers. The regulation was adopted and went into force on 1 January.
Iceland is an EU candidate and is already heavily integrated into the EU through its membership in the European Economic Area, European Free Trade Association and Schengen area.
When Bulgaria and Romania joined the EU in 2007, Iceland's government decided - like many EU countries - to postpone any decision on giving workers of the EU's newest countries free access to the labour market.
A seven-year transition period was built into the EU accession agreements of both Romania and Bulgaria before their workers could get unfettered freedom of movement (see background), although countries have the freedom to waive those restrictions.
Iceland's move follows Italy's decision to open its labour market to Bulgaria and Romania.