The dating of the settlement of Iceland has been debated for many years. According to written sources (sagas) from the early 12th century, the first Norwegian settlers arrived in Iceland in AD 874. However, some 14C dates from the earliest archaeological sites in Iceland, invariably from samples of birch and other indigenous wood species, have yielded surprisingly old ages, older by 100–150 yr than the historical date, suggesting that the settlement took place in the 7th or 8th century. In this paper, we report 16 new 14C dates of pairs of barley grain and wood samples from an excavation in Reykjavík in 2001. The new results show that the wood samples tend to be older than the grain samples by up to about 100 yr. We argue that the barley grains give the true date (AD 890), whereas the wood dates are too old. The grain dates are in close agreement with the settlement year quoted in the written sources. In particular, our new data eliminate the need of any of the ad hoc theories introduced up to now to explain the suspiciously high 14C ages of wood samples from the settlement of Iceland, namely, 1) the island effect, 2) the volcanic or geothermal effect, or 3) that settlement actually took place significantly before the time recorded in the sagas.