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All malignant tumours of soft tissues diagnosed in Iceland between 1955 and 1988 were reviewed histologically. Of a total of 155 tumours, 129 were, on review, soft tissue sarcomas, while 26 had been erroneously diagnosed and were excluded from the study. In 25% of the tumours the original sarcoma diagnosis was changed to another sarcoma type. Malignant fibrous histiocytoma, liposarcoma and leiomyosarcoma together comprise more than half of all tumours diagnosed. Contrary to previous estimations, according to this study, the age‐standardized incidence of soft tissue sarcoma in Iceland is 1.8 per 1000.000 for males and 1.6 per 100.000 per females, which is similar to incidence rates in the other Nordic countries. The majority of sarcomas were of relatively high grade. The tumours were graded using both three and four grades of malignancy. Both systems yielded prognostic information although it was not possible to detect significant differences in survival for grade I and grade II tumours when the four grade system was used. The results of this study show that the epidemiology of soft tissue sarcoma in Iceland is similar to that found in other Western countries.