At the turn of the last century, the idea was born within the Institute for Foreign Languages to have a building constructed to house both the teaching of foreign languages as well as facilities for an international centre for the research and dissemination of knowledge of foreign languages and cultures at the University of Iceland. At the same time, the institute changed its name to the Vigdís Finnbogadóttir Institute for Foreign Languages.

Auður Hauksdóttir, who was then the institute’s director, and Vigdís Finnbogadóttir worked on making this idea a reality, helped by a grant from the Swedish National Bank (Sveriges Riksbank) which had enabled the institute’s board of governors to set up an international group of advisers in 2008.

Vigdís Finnbogadóttir was appointed Goodwill Ambassador for Languages by the United Nations Educational, Scientific and Cultural Organization in 1998, at which time the wish for the institute to operate under the auspices of UNESCO was first openly mooted.

Katrín Jakobsdóttir, who was then the Minister for Education and Culture, signed a mutual agreement between the Icelandic government and UNESCO on 15 April 2013, and Irena Bokova, the Director-General of UNESCO, signed it later that same year. According to the agreement, the Vigdís Centre operates as a “Category 2 Centre under the auspices of UNESCO.”