Extensive morphological variation of tetraploid birch (Betula pubescens) in Iceland is believed to be due to gene flow from diploid dwarf birch (B. nana) by means of introgressive hybridization. A combined morphological and cytogenetic approach was used to investigate this phenomenon in two geographically separated populations of natural birch woodland in Iceland. The results not only confirmed introgressive hybridization in birch, but also revealed bidirectional gene flow between the two species via triploid interspecific hybrids. The populations showed continuous morphological variation connecting the species, but karyotypically they consisted of only three types of plants: diploids, triploids, and tetraploids. No aneuploids were found. Some of the tetraploid plants had B. pubescens morphology as expected, but most of them had intermediate characters. Most of the diploid plants were B. nana, but some were intermediates and a few had B. pubescens morphology. The triploid plants were either intermediates or they resembled one of the two species. Similar introgressive variation was observed among the diploid and triploid progeny of open-pollinated B. nana in a garden. Birch samples including field plants and artificial hybrids were further examined using a molecular method based on genomic Southern hybridization. The experiments verified introgression at the DNA level.