The core functions of the scientific work at the Árni Magnússon Institute for Icelandic Studies are researching, recording, processing, and disseminating the data maintained by the institute. This kind of fundamental research is fostered and endorsed by the institute. The publication and dissemination of this research is a priority for the institute. The institute emphasizes academic freedom and encourages its employees to publish their research results in international forums as well as Icelandic outlets. It is important to promote in equal measure publications released by the institution as well as research by its employees released elsewhere, since it is done in the institute's name.

The institute archives digital research materials (raw data, such as the transcripts of texts, etc.) in a secure manner and makes them accessible. Digital data from earlier times must be compiled in a deliberate manner and a work process must be in place that governs how the data is archived.

The institute provides for recruitment in research efforts by allocating funds annually so that students may be hired to work with institute's basic data. Funds are also provided in form of grants and/or prizes for final projects (at the BA/BS/Bed/MA/MS/MEd level) based largely on data maintained by the institute.

The institute advocates in-house collaboration to achieve the greatest use of employee expertise across disciplines. Employees are encouraged to pursue research collaborations, both in Iceland and internationally. Employees are also encouraged to use their sabbaticals to focus on independent research projects.

When filling research positions the institution considers how best to consolidate but also expand the body of research, so that research at the institute may engage as many aspects of the data it maintains as possible. Temporary research positions associated with Árni Magnússon and Sigurður Nordal may be used systematically with the goal of bringing people from different disciplines, or with new approaches, in connection with the institute's data, and in this way supporting certain research efforts or fields of research. At the same time, the institute endeavors to collaborate with other institutes on research efforts in understaffed disciplines in the academic field or where efforts are otherwise lacking. When making hiring decisions it is important to consider the academic field as a whole, both within and outside the institute, and to take into account the people at work at partner institutions in Iceland.