Iceland have the biggest win in their history; England have the biggest embarrassment in theirs.
England captain Wayne Rooney gave his side the lead from the penalty spot after just four minutes. But Iceland responded immediately through Ragnar Sigurdsson's volley, and Kolbeinn Sigthorsson completed the comeback in the 18th minute.
Iceland can now prepare for a trip to Paris, where they will face hosts France in the quarter-finals on Saturday.
England are going home, and Roy Hodgson's four-year spell as Three Lions manager has ended. The 68-year-old's contract was set to expire at the end of the tournament and he immediately resigned after this debacle.
England were overwhelming favourites to see off Iceland - a country that does not boast a professional league. But they could not win despite the six changes Hodgson made for the game against Slovakia in preparation of this knockout match.
This failure only serves to make Hodgson's gamble to bench the likes of Rooney for their final Group B game all the more reckless. Had England unlocked the Slovakian defence that shipped in three goals against Germany, they would have been in the top-light half of the draw. Yet that place is being occupied by debutants Wales, who saw off Northern Ireland on Saturday to earn a quarter-final clash against Belgium.
To be fair to Northern Ireland, England might not have beaten them either. The only certainty is that Hodgson's men can have no excuses.
A bad draw in the group stage? No. Poor officiating? No. Injuries or suspensions to key players? No. The youngest squad at Euros? That was Hodgson's choice. Fatigue? England players have not played more minutes (81, 319 minutes before the Euros) than France (86, 115) or Portugal (82,655) - both of whom are in the last eight.
England under Hodgson just have not been good enough. He came into the game with just seven losses from 55 games but he leaves the Stade de Nice with a poor record in major tournaments.
England's run at Euro 2012 was halted in the quarter-finals. They failed to get beyond the group stage at the 2014 World Cup. And now, they have been sent packing by major tournament debutants.
- England took the lead after four minutes. Raheem Sterling was brought down by goalkeeper Hannes Halldorsson in the box and England were awarded a penalty. Rooney tucked the ball into the bottom left corner.
- Two minutes later, Iceland took a long throw-in. Kari Arnason flicked it across the face of the goal and Ragnar Sigurdsson volleyed home from close range.
- In the 15th minute, Dele Alli's powerful shot from just outside the box just cleared the crossbar.
- In the 19th minute, Gylfi Sigurdsson, at the edge of the box, passed to Jon Dadi Bodvarsson, who played Sigthorsson in. The forward's sidefoot shot slipped through Joe Hart's fingertips.
- In the 55th minute, Hart saved Ragnar Sigurdsson's overhead kick from six yards out.
- In the 70th minute, substitute Jamie Vardy was bearing down on goal. But Ragnar Sigurdsson executed a perfect tackle and England settled for a corner. Nothing came out of the set-piece.
- In the 83rd minute, Aron Gunnarsson raced to a through ball but has Jack Wilshere for company. He twisted and turned and fired a shot away but Hart saved at the near post.
The talking point
Iceland's spirit cannot be underestimated. They might have arrived in France as minnows but this brave side are a huge threat. They qualified for Euro 2016 in a difficult group that included the Netherlands. They were unbeaten in the group stage, and they have now come from behind to beat England. With England chasing the game in the second half, Hodgson's men could not even register a single shot on target. Iceland know how to defend but they are clinical in front of goal too. They have scored six goals at Euro 2016 from their first 11 shots on target.
Man of the Match
Ragnar Sigurdsson. The 30-year-old centre back was a force on both ends of the pitch. He got the crucial equaliser and could have added to his tally with a spectacular overhead kick in the second half. On the defensive end, he made 10 clearances and five interceptions. Most crucially, he stopped the pacey Vardy when he was the last defender. His perfectly-timed tackle saw Iceland concede a corner kick and nothing more.
What the result means
Iceland have a chance to write another chapter in their fairytale story. They face hosts France for a place in the semi-finals on Saturday. Les Bleus will have an extra day's rest after seeing off the Republic of Ireland on Sunday.
Iceland scored two goals in the first 18 minutes against England - as many as England conceded in their three group stage matches.
What they said
Ragnar Sigurdsson: "It's really simple, we keep doing it through belief."
Hodgson: "I'm extremely disappointed with the result and our exit. We haven't progressed as far as we're capable of and that's unacceptable."