Many shrimp species live in Icelandic waters. However, only one is fished, northern prawn (Pandalus borealis). Sometimes small quantities of Aesop shrimp (Pandalus montaqui) are also fished as bycatch.

The northern shrimp is common in the depth range of 50 to 500 m and is most abundant in the cold waters north of Iceland. Substantial fisheries on northern shrimp were conducted in the fjords in northern Iceland. Pandalus shrimps are hermaphroditic. They are males for the first 3 to 5 years but then become females.

Other shrimp species found in northern Iceland are sculptured shrimp (Sclerocrangon boreas), Polar lebbeid (Lebbeus polaris), doll eualid (Eualus pusiolus), Atlantopandalus propinqvus, Norwegian shrimp (Pontophilus norvegius), sevenline shrimp (Sabinea septemcarinata), friendly blade shrimp (Spirontocaris lilljeborgii) and parrot shrimp (Spirontocaris spinus). Four of the last ones have only been found as planktonic larvae. Eualus pusiolus is probably the most common species in the fjords but it is also the smallest. These shrimp species are only found below the seashore and some, such as the northern shrimp, only in the deep channels of the fjords.

In deeper waters, north of the fjords, the large and armoured Sclerocrangon ferox can be found. Another species found there is northern ambereye (Hymenodora glacialis). It is mostly pelagic while S. ferox is benthic. H. glacialis is bright red and has a soft shell. It is an important food for cod and Greenland halibut in the colder waters off Iceland. Sergestes arcticus can also be found in the pelagic zone north of the country. This species is in an ancient shrimp taxa distantly related to the above mentioned species.