Milan Badelj (53rd) and Ivan Perisic (90th) scored for Croatia.
Gylfi Sigurdsson had rekindled some momentary hopes for Iceland when he converted a penalty in the 76th minute.
Croatia finished the group stage with nine points, having won all their three matches.
Iceland finished at the bottom of the group with one point.
It was a disappointing end to their campaign, which had started with a lot of promise when they held formidable Argentina 1-1 in their opening match.
(This story has not been edited by Social News XYZ staff and is auto-generated from a syndicated feed.)
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