Ivan Perisic's late goal ensured Croatia topped World Cup Group D with maximum points as they knocked out a resilient Iceland with a 2-1 win in Rostov-on-Don.
Gylfi Sigurdsson's 76th-minute penalty gave Iceland hope of mounting a comeback following Milan Badelj's opener, but Perisic made sure of the points for Croatia in the dying embers.
Croatia will now meet Denmark in the round of 16 in Nizhny Novgorod on Sunday, while Iceland's maiden appearance at a World Cup comes to an end despite their best efforts to turn the game around.
Badelj - who had previously rattled the woodwork - marked his first start of the tournament with a thumping 53rd-minute opener.
Sverrir Ingason rattled the bar with a header in response for Iceland, but the only way they could beat Croatia goalkeeper Lovre Kalinic on his superb World Cup bow came from the spot.
Sigurdsson missed a penalty in Iceland's defeat to Nigeria on matchday two, but made no mistake this time with a finish high into the net after Dejan Lovren had handled in the area.
But Iceland's fighting spirit ultimately proved for nothing, Perisic securing a third successive win for Croatia, who will be joined in the last 16 by Argentina following their dramatic win over Nigeria.
One of two Croatia players to retain their place, Luka Modric nearly opened up Iceland's defence with a wonderful outside-of-the-boot cross 19 minutes in.
Iceland started to threaten just before the half hour - Hordur Magnusson heading wide from Johann Gudmundsson's outswinging corner.
Alfred Finnbogason looked set to take full advantage of sloppy play from Badelj soon after, only for the striker to drill wide from the edge of the area.
A Kalinic fumble then allowed Birkir Bjarnason to pounce from a corner, but the shot-stopper atoned for his error with a fine save from Aron Gunnarsson's curling effort.
Croatia improved following the restart, and it was Badelj who had their first opportunity with a venomous strike that clattered off the crossbar.
But the midfielder got his goal when he reacted sharply to a loose ball in the Iceland box and duly hammered home from close range.
Iceland looked set to respond instantly, only for Ingason's header to rebound back off the bar with Kalinic well beaten.
Bjarnason should have restored parity with 20 minutes remaining when he latched onto Finnbogason's cross, but got his first-time finish all wrong.
Lovren's clumsy handball did enable Sigurdsson to make amends for his failure from the spot last time out, though it was Perisic who had the final say.
Badelj turned provider with a neat throughball and, having outpaced his marker, Perisic lashed home to ensure Zlatko Dalic's tinkering did not derail any momentum for Croatia, who head into the knockout rounds as arguably the form team in the competition.