Their plane flew low over the capital Reykjavik before landing at Keflavik airport where the local fire services gave them a fire hose guard of honour with shooting water creating a rainbow.
Striker Kolbeinn Sigthorsson, who scored a consolation goal in the crushing 5-2 defeat to the hosts at the Stade de France on Sunday, said he was happy to be home.
“It was a dream come true to get that support,” he said of the estimated 30,000 fans —some 10 percent of the population —who followed the nation in France.
“We experienced something simply wonderful, it was a dream come true and we are proud to have brought such cheer to our country,” he said, adding that the friendly behaviour of the fans had done the country proud.
The players were then paraded through the streets of the capital on a double decker bus in the direction of Arnarholl Park, to celebrate with their fans and sing the famous “huh” - the Viking war chant - which is actually Scottish, punctuated by hand clapping.
“Fairy tales still exist! It’s rare - if indeed this has ever happened - to unite us Icelanders as you did on the football pitch,” Prime Minister Sigurdur Ingi Johannsson told the team in downtown Reykjavik, to the resounding cheers of tens of thousands of supporters.
“You are a national treasure!” he added as fans waved flags and team jerseys, and children held aloft cards with their favourite players.
To the delight of the crowd, the heroes of the day sang the “huh” watched emotionally by Swedish coach Lars Lagerback who hailed a “team performance” and confided he felt “at home” whenever he was in Iceland.