The move comes after backlash from the Humane League UK, which criticised the supermarket for abandoning its original 2025 goal.
Iceland first promised to remove cages from its egg supply chain in 2016, citing customer demand. But earlier this year, it quietly dropped the commitment, until now.
The updated pledge covers only whole shell eggs, not those used as ingredients in processed foods.
All other major UK supermarkets remain on track to meet the 2025 cage-free deadline.
Sean Gifford, managing director of the Humane League UK, welcomed the U-turn but urged Iceland to act faster.
He said: “After breaking their original promise to stop keeping hens in cruel cages by 2025, Iceland is finally doing the right thing. Of course, we’d rather they move faster than 2027.”
The shift follows a campaign led by the charity, including a petition backed by actress Joanna Lumley and signed by over 70,000 people.
“There is no better symbol of cruelty to farmed animals than a hen in a cage,” said Ms Lumley.
“I believe that the British public are committed to seeing farmed animals treated with kindness and decency.”
Protests also took place outside Iceland stores and at the company’s Deeside headquarters, increasing pressure on the retailer to act.