Republic of Ireland Under-21s suffered their first Euro 2021 qualifier defeat with a 1-0 loss to Iceland.
Stephen Kenny’s side missed several good chances to score as Sveinn Aron Gudjohnsen’s first-half penalty, conceded after Lee O’Connor was penalised for handball, proved the difference in Reykjavik.
O'Connor was sent off late on for a second bookable offence while captain Jayson Molumby picked up a yellow card with both players set to be suspended for the Armenia qualifier in November.
The defeat, coming on the back of last week’s goalless draw with Italy, has seen Ireland's lead at the top of Group A trimmed to a single point ahead of Iceland, who have a game in hand.
Ireland dominated much of the game and fashioned a number of chances, but couldn't find the break-through. Bohemians' Dan Mandroiu had two 20-yard free-kicks during the first half, but both went narrowly over the bar.
Kameron Ledwidge made his first start for the U-21s and turned in an impressive performance as his cross found Mandroiu and Michael Obafemi picked the ball up, but his shot was blocked by the keeper in the 22nd minute.
Six minutes later, Iceland were awarded a penalty as O'Connor was harshly deemed to have handled the ball and Gudjohnsen fired home to the give the home side the lead.
Just before the break, Ireland had their best chance of the game as the skipper Molumby won the ball high up the pitch and after he found Adam Idah, Obafemi collected the ball in space but his shot was well saved.
A minute later, Zach Elbouzedi burst down the left and crossed for Idah but his flicked header went narrowly over the bar.
The second half continued to see Ireland push Iceland back as Mandroiu found space on the right and fired across a low ball, looking for Elbouzedi, but the keeper blocked the ball and cleared in the 56th minute.
Ireland fashioned another chance just four minutes later as Molumby's fantastic through-ball found the on-rushing Idah but he fired wide from a tight angle.
Iceland, to their credit, defended stoutly as Kenny brought on Aaron Drinan and Gavin Kilkenny in the final stages and the latter almost found the break-through with eight minutes to go. Elbouzedi's cross found Kilkenny in space on the left and after he turned inside, his curling effort was well saved.
It was Ireland's first defeat of the campaign with games against Armenia and Sweden to come in November.
"We're extremely disappointed with the result. Looking back, the penalty looks extremely harsh and after that, Iceland made it very difficult for us," said U-21 manager Stephen Kenny.
"We had a number of great chances but couldn't find the goal we needed and we've got to pick ourselves up from it. The conditions were very difficult for the players and Iceland defended very well."
Iceland: Gunnarsson (GK), Sampsted, Olafsson (Palmason 80), Hauksson, Pordarson (Hafsteinsson 77), Porsteinsson (C) (Willumsson 90), H. Gunnarsson, Gudjohnson (Ingimundarson 77), Willumsson, Finnsson, Leifsson.
Republic of Ireland: Kelleher (GK), O'Connor, Ledwidge, Masterson, O'Shea, Coventry, Elbouzedi, Molumby (C), Idah, Mandroiu (Drinan 86), Obafemi (Kilkenny 75).
Red Card: O'Connor
Referee: Dumitru Muntean (MDA)