Iceland has awarded two licences for oil and gas exploration and production in the waters off the north east coast of the Atlantic island.
The licences have gone to Faroe Petroleum and Valiant Petroleum, with Norway taking a 25% stake in both through state-owned oil firm Petoro.
Experts have predicted the Arctic could be the next major oil-producing region.
Iceland is hoping it will be able to generate much-needed revenues from any discoveries of oil and gas.
"This is of course an important step, [as] these are the first real licences that we believe will be used, and they call for extensive research in the area," said Steingrimur Sigfusson, Iceland's Minister of Industries and Innovation.
"The Norwegian participation is also important - we think that it strengthens the matter in every way, not least to have the support of Norway and its massive knowledge in this field."