The northeastern part of the North Atlantic subpolar gyre is a key passage for the Atlantic Meridional Overturning Circulation upper cell. To this day, the precise pathway and intensity of bottom currents in this area is not clear. In this study, we make use of regional high resolution numerical modeling to suggest that the main bottom current flowing south of Iceland originates from both the Faroe‐Banks Channel and the Iceland‐Faroe Ridge and then flows along the topographic slope. When flowing over the rough topography, this bottom current generates a 200 m large bottom mixed layer. We further demonstrate that many submesoscale structures are generated at the southernmost tip of the Icelandic shelf, which subsequently spread water masses in the Iceland Basin. These findings have major implication for the understanding of the water masses transport in the North Atlantic, and also for the distribution of benthic species along the Icelandic shelf.