PARIS — Iceland, the smallest nation at the European Championship, delivered the feel-good story of the tournament by beating Austria 2-1 on Wednesday to qualify for the knockout stages of the competition.

Iceland’s victory, which came deep in stoppage time, has earned the team a mouthwatering round of 16 match against England in Nice Monday — a prospect previously described as a “dream” by captain Aron Gunnarsson.

Arnor Ingvi Traustason sealed the win for Iceland in the fourth minute of injury time following a classic counter attack as Austria pressed for a winner that would have seen it qualify for the next round of Euro 2016.

Having drawn its previous two matches at Euro 2016, the victory secured Iceland second place in Group F behind Hungary with five points.

Iceland, a tiny island country of barely 330,000 people that was expected to struggle in France, took the lead through Jon Dadi Bodvarsson in the 18th minute at Stade de France.

Austria sought to get back on level terms and had a great chance in the 37th minute but defender Aleksandar Dragovic struck the post with his penalty kick.

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Austria eventually equalized in the 60th through substitute Alessandro Schoepf and dominated the final stages, only to be hit by a classic counter-attack in the last seconds as almost the entire team piled forward.

Traustason slid in at the far post to bundle the ball into the net, and was buried by a heap of Iceland players, substitutes and officials. The whole squad celebrated in front of their fans in joyous scenes after the final whistle.

The Austrians arrived at the Euros as potential dark horses after going unbeaten in qualifying, and failed to live up to their billing.

But a lack of cutting edge up front has been Austria’s problem all tournament.

As has the below-par displays of its undisputed star player, David Alaba. Much was expected of the Bayern Munich defender, but he started the final two games out of position in a playmaker role and it clearly didn’t suit him.

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At times against Iceland, he was deployed, somewhat bizarrely, as a so-called “false nine,” before he dropped deeper for the second half. He did set up Schoepf for his goal.

It could all have been so different had Dragovic converted his penalty, awarded after Alaba was tugged back as he leapt for a header.

Dragovic’s penalty struck the outside of the post and he dropped to his knees and covered his face with his jersey, completing a miserable tournament for a defender who was sent off against Hungary and therefore missed the subsequent Portugal game because of suspension.