Iceland, Norway and Japan are the only three countries that allow commercial whaling despite fierce opposition from animal rights activists.
In January, Hvalur, the only whaling group left in Iceland, applied for a five-year permit to hunt whales after its licence expired.
Another company hung up its harpoons for good in 2020, saying it was no longer profitable.
The government said in a statement that the new license would be valid for the 2024 season and permitted the hunting of 128 fin whales -- the second-longest marine mammal after the blue whale -- down from 161 whales the previous year.
"This decision aligns with the Marine and Freshwater Research Institute's 2017 advice and considers the conservative ecosystem factors of the International Whaling Commission," the government said.
"It is based on a precautionary approach and reflects the government's increased emphasis on the sustainable use of resources," it added.
Whaling in Iceland generally takes place between mid-June and September.
With the new license, 99 whales can be hunted in the Greenland/West Iceland region and 29 whales in the East Iceland/Faroe Island region, the government said.
On June 20, 2023, the country suspended whaling for two months following a government-commissioned inquiry that concluded the methods used did not comply with animal welfare laws.
Monitoring by the government's veterinary agency showed that the explosive harpoons used by hunters to catch whales were causing them prolonged agony, with the hunt lasting up to five hours after they had been harpooned.
- 'Shameful' -
In October, Hvalur said the shortened 2023 season, which lasted only three weeks, had ended with 24 whales killed.
Whalers had already struggled in the past to meet the quotas.
It had been unclear whether the food and agriculture minister, Bjarkey Olsen Gunnarsdottir, would grant a license for the 2024 season, and the Humane Society International charity had urged Iceland "to put an end to this needless cruelty for good."
"It is devastatingly disappointing that Minister Gunnarsdottir has set aside unequivocal scientific evidence demonstrating the brutality and cruelty of commercial whale killing and allowed whales to be killed for another year," Adam Peyman from Humane Society International told AFP, calling the decision a "new shameful entry in the conservation history books".
"Whales already face myriad threats in the oceans from pollution, climate change, entanglement in fish nets and ship strikes, and fin whale victims of Iceland's whaling fleet are considered globally vulnerable to extinction," Peyman added.
The CEO of Hvalur, Kristjan Loftsson, did not respond to a request by AFP for comment.
According to a survey last June by the Maskina institute, 51 percent of Icelanders are opposed to whaling, an increase from 42 percent in a poll four years earlier.
Iceland has depended heavily on fishing and whaling for centuries.
But in the past two decades its tourism industry, including whale watching tours, has blossomed.
Japan, by far the biggest market for whale meat, resumed commercial whaling in 2019 after a three-decade hiatus, drastically reducing the need for imports from Iceland.
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