The fisheries ministry says 30 minke whales and nine fin whales will be taken between now and August 31, 2007.
Conservationists say fin whales are endangered.
Norway is the only nation to sanction commercial hunts.
Both Iceland and Norway argue that stocks have recovered since the International Whaling Commission banned commercial hunts in 1985.
Since then, Iceland has sometimes caught whales for scientific research.
Opens floodgates
The World Conservation Union (IUCN) says Iceland's decision to resume commercial whaling is disturbing.
It has warned that more countries could follow its lead and also renege on the international moratorium on whale hunting.
"We're disappointed by this development and disturbed by it because the amount of whaling is increasing," the IUCN's representative on whaling, Justin Cooke, said.
"In IUCN's view it would be much better if the countries return to the negotiating table and conclude a regulatory system so that the kind of renegade whaling by Iceland and other countries won't occur," he added.
Iceland had warned that it planned to resume whaling when talks at the International Whaling Commission on a regulated system were suspended amid disagreement earlier this year.
The whaling commission narrowly passed a resolution in June declaring that a 20-year moratorium on commercial whale hunting, which is designed to preserve sparse whale populations, was "no longer necessary".
The Icelandic fisheries ministry announced today that it would authorise commercial whaling again, making it only the second country after Norway to hunt whales for commercial reasons.
"IUCN is concerned that the failure to conclude an international regime for the regulation for whaling means that unilateral whaling by countries is likely to increase," Cooke said.
A ministry official said the meat would be exported.
Cooke said those were largely symbolic levels of whaling but cautioned that a move to export meat would be worrying.
"That would mean Iceland is not just turning its back on the International Whaling Commission but also on another convention on the trade on endangered species," he said.
Ban on trading
The United Nations Convention on International Trade in Endangered Species of Wild Flora and Fauna (CITES) forbids trade in big whales.
The convention has been signed by 160 countries, including whaling nations Iceland, Norway and Japan.
Japan abides by the whaling commission moratorium but conducts some whaling for so-called research purposes.
It relies on what opponents say is a loophole in the IWC charter.
Iceland had also respected the whaling moratorium until Tuesday.
Norway ignores it.
Around 2,000 whales are hunted and killed each year.