This article discusses the historical background to the medieval Icelandic sagas. It draws on the work of Icelandic historians, especially Gunnar Karlsson, to argue that the key factor was a distinctive political order established in Iceland before the conversion to Christianity. This was not a peasant democracy, as some idealizing interpretations have suggested; it was an oligarchy sui generis, with power (and a remnant of religious authority) vested in an elite of chieftains. However, there was no executive centre. This decentralized regime left its mark on the Christianizing process; the Icelanders accepted Christianity without monarchy, and for a long time without a fully empowered Church. Together with a pronounced cultural focus on narrativity, this political context explains the rise of a vernacular literature that was in many ways influenced by Christian sources, but retained a connection to pre-Christian traditions.