Iceland was set to get its first leftist majority government since its founding 65 years ago, latest election returns early Sunday showed.
With 82 per cent of the ballots counted, the Social Democrats and Greens had gained 52.7 per cent of the vote in Saturday's parliamentary elections.
This would give the coalition 34 seats in the 63-seat Althing parliament.
In the last elections four years ago, the Social Democrats and Greens had garnered 41.1 per cent of the vote.
The two parties had been governing as an interim minority coalition after the previous grand coalition government under Geir Haarde, 58, resigned in January, in the wake of Iceland's economic meltdown and mass street protests.
Haarde's conservative Independence Party gained just 23.9 per cent backing, according to the latest returns, plunging from their 36.1 per cent showing in the last elections.
With the early returns showing her coalition heading towards victory, Prime Minister Johanna Sigurdardottir promised a quick initiative to gain entry for the country of 320,000 people into the European Union, reported dpa.