Iceland's outgoing left-right coalition government said Sunday it had reached a deal to continue together in power for four more years, more than two months after winning a majority in a general election.

Prime Minister Katrin Jakobsdottir of the Left Green Movement will continue to head the government, the parties said.

The Left-Green Movement, the conservative Independence Party and the centre-right Progressive Party together won 38 of the 63 seats in parliament in the September vote, up from the 33 they had held since the previous election in 2017.

The unusual alliance -- which has earned Jakobsdottir some criticism and saw her party emerge weakened from the election -- has brought Iceland four years of stability after a decade of political crises.

This is the first time since 2003 that an outgoing government has held on to its majority in an election.

"It has been complicated for the past four years and it will continue to be complicated. But maybe it is also healthy having to work with people who don't agree with you on everything," Jakobsdottir told AFP.

"The message from the parliamentary election was very clear, giving the government a very clear majority," she added.

Iceland's Prime Minister Katrin Jakobsdottir will continue to head the government Iceland's Prime Minister Katrin Jakobsdottir will continue to head the government Photo: Ritzau Scanpix via AFP / Mads Claus Rasmussen

Her Left-Green Movement won only eight seats, three fewer than in 2017, losing ground to its right-wing partners which both posted strong showings.

While Jakobsdottir holds on to the post of prime minister, her party lost control of the symbolically-important environment and health ministries, but will head the fishing and agriculture ministry as well as that for employment.

Meanwhile the largest party, the Independence Party, retains the finance, foreign affairs and justice portfolios, and took on those for environment and industry as well.

The Progressive Party will head the health, education, and trade and culture ministries, as well a new portfolio for infrastructure grouping together transport, housing and urbanisation issues.

The lengthy negotiations to form the new government were attributed to ideological divisions between the Left Greens and the Independence Party.

In addition, the parties had to await the final election results, only approved by parliament on Thursday after voting irregularities were reported in one of the island's six constituencies.