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The first horses came to Iceland in the ninth century with Viking settlers from Norway and the British Isles, and horses remained the main form of land transportation in the country until the first roads for wheeled vehicles were built in the 1870s. Since approximately 1100, import of horses to Iceland has been forbidden by law, so the breed has remained pure.

The Icelandic Horse is renowned for being hardy, athletic, independent, spirited, friendly, adaptable, and sure-footed, with five natural gaits. Averaging 13 to 14 hands tall, the Icelandic Horse is a versatile family riding horse, bred to carry adults at a fast pleasing gait over long distances. It is distinctive for its thick and often double-sided mane and long tail, and remarkable for its wide range of colors.

In Icelandic mythology, Loki the Trickster god, once became a breeding mare to lure away a giant's stallion and so prevent the giant from winning the hand of Freyja, goddess of beauty. The result of that union was Sleipnir, the supreme god Odin's eight-legged steed. "Amongst gods and men, that horse is the best," says the 13th-century Prose Edda written by Snorri Sturluson. Sleipnir is shown in one famous image with its eight legs extended in the ultimate flying pace. Other gods also owned horses. The goddess Gna the messenger had a horse that ran "through the air and over the sea." Called Hoof Flourisher, it was sired by Breaker-of-Fences on Skinny Sides. The gods of Day and Night drove chariots drawn by Shining Mane and Frosty Mane: The brightness of the sun was the glowing of the day-horse's mane, while dew was the saliva dripping from Frosty Mane's bit. Horses were also associated with Freyr, god of plenty, and sacrificed in his honor.

Other medieval Icelandic works depict racehorses, saddlehorses, packhorses, and fighting horses. The first Icelandic Horse known by name, the mare Skalm, appears in the 12th-century Book of Settlements. The chieftain Seal-Thorir settled where Skalm lay down under her load. Horses play key roles in some of the most famous Icelandic Sagas, including Hrafnkel's Saga, Njal's Saga, and Grettir's Saga. The sagas, written anonymously in the 13th century, look back as far as the early 800s. In these stories, horses were first of all riding horses and beasts of burden. But the sagas also tell of horse races and horse fights, both of which often led to violence, and of horses given as gifts to stop or avert a feud. A fine horse was often a medieval Icelander's most prized possession.

In Iceland today, horses are seen as one way of preserving the country's agricultural tradition while improving its economy. Long distance horse trekking is popular among Icelanders as well as among tourists, as are horse shows, horse races, horse trading, and pleasure riding. Exports of Icelandic Horses have increased since the first were sent to Germany in the 1940s. Currently there are some 70,000 Icelandic Horses in other countries (as compared to 80,000 in Iceland), spread unevenly among the 19 member countries of the Federation of Icelandic Horse Associations (FEIF). Some 40,000 horses are in Germany. In all of North America, by contrast, there are only 4598 registered Icelandics.