Opportunities to directly study the founding of a human population and its subsequent evolutionary history are rare. Using genome sequence data from 27 ancient Icelanders, we demonstrate that they are a combination of Norse, Gaelic, and admixed individuals. We further show that these ancient Icelanders are markedly more similar to their source populations in Scandinavia and the British-Irish Isles than to contemporary Icelanders, who have been shaped by 1100 years of extensive genetic drift. Finally, we report evidence of unequal contributions from the ancient founders to the contemporary Icelandic gene pool. These results provide detailed insights into the making of a human population that has proven extraordinarily useful for the discovery of genotype-phenotype associations.