Level and partitioning of genetic diversity is expected to vary between contrasting habitats, reflecting differences in strength of ecological and evolutionary processes. Therefore, it is necessary to consider processes acting on different time scales when trying to explain diversity patterns in different parts of species' distributions. To explore how historical and contemporary factors jointly may influence patterns of genetic diversity and population differentiation, we compared genetic composition in the perennial herb Arabidopsis lyrata ssp. petraea from the northernmost parts of its distribution range on Iceland to that previously documented in Scandinavia. Leaf tissue and soil were sampled from ten Icelandic populations of A. lyrata. Seedlings were grown from soil samples, and tissue from above-ground and seed bank individuals were genotyped with 21 microsatellite markers. Seed bank density in Icelandic populations was low but not significantly different from that observed in Norwegian populations. While within-population genetic diversity was relatively high on Iceland (H(E) = 0.35), among-population differentiation was low (F(ST) = 0.10) compared to Norwegian and Swedish populations. Population differentiation was positively associated with geographical distance in both Iceland and Scandinavia, but the strength of this relationship varied between regions. Although topography and a larger distribution range may explain the higher differentiation between mountainous Norwegian relative to lowland populations in Sweden, these factors cannot explain the lower differentiation in Icelandic compared to Swedish populations. We propose that low genetic differentiation among Icelandic populations is not caused by differences in connectivity, but is rather due to large historical effective population sizes. Thus, rather than contemporary processes, historical factors such as survival of Icelandic lineages in northern refugia during the last glacial period may have contributed to the observed pattern.