This chapter analyses the historical roots of social enterprise (SE) in Iceland. It then addresses concepts and definitions that describe social enterprise, and a tentative categorisation of social enterprise will be put forward. Finally, the chapter discusses SE-related policy, legal environment within which social enterprises operate and support for these initiatives. The urbanisation and economic upswing that followed industrialisation at the turn of the 20th century created several mass movements focusing on human rights and public-welfare objectives. A public-sector social enterprise is defined as "a kind of 'reconfiguration' or 'externalisation' of public services under the organisational form of social enterprise, with the expressed aims of improving and innovating in the provision and delivery of services". Cooperatives are "first and foremost mutual-interest enterprises, owned and (democratically) controlled by their members for their own non-capitalist interests". The terms "social enterprise", "social innovation" and "social entrepreneurs" have rarely been cited in Icelandic public policy.