Ronaldo helps Portugal continue revival
New coach Paulo Bento has overseen back-to-back wins since replacing Carlos Queiroz last month, putting Portugal back into contention in Group H after starting their campaign with a draw against Cyprus and a defeat to Norway.
"The only negative thing from the game was conceding another goal from a dead-ball situation, as we had done against Denmark on Friday," Bento said.
"But we have to highlight that in an adverse moment, when Iceland levelled, our team reacted well, continued to control the game and earned a deserved win."
Ronaldo's third minute strike after a foul on Carlos Martins in front of the Icelandic box was not as powerful as his usual trademark efforts, but keeper Gunnleifur Gunnleifsson was slow to react and let the ball go in to his right.
"I chose where I wanted to place the ball and thankfully scored the goal that paved the way for the win," said Ronaldo.
"We're happy, we can breathe a little as we remain in the fight to qualify," he added.
Iceland tried to use their aerial advantage and were rewarded on 17 minutes when Heidar Helguson headed in from a corner.
Portugal were ahead again 10 minutes later, however, with Raul Meireles unleashing an unstoppable shot from 30 metres.
Substitute striker Helder Postiga took advantage of Gunnleifsson's fumble from a Ronaldo cross in the 72nd minute to net his first international goal in over two years with a simple tap-in to make it 3-1.
Portugal sit in second place on seven points, two adrift of Norway and one ahead of Denmark, both of whom have a game in hand.