Discarding fish has been a part of the fisheries for centuries but it has been very difficult to monitor how much is discarded, especially in areas where it is an illegal activity. In this study the ecological and economic effects of discarding were investigated using the Atlantis model for Icelandic waters. Five different scenarios were compared, using different discarding rates and selectivities. The results showed that a complete stop of discarding fish (cod and haddock) and landing everything instead had little ecological and economic impact. Improved selectivity, which would result in not catching the fish that would be discarded, had great beneficial economic effects. The increase in biomass led to higher landings, which consequently led to higher revenue. Also, the cost decreased with increasing biomass, which increased the profit of the fisheries. None of the five scenarios had great ecological effects but only discarding of cod and haddock, which have low discard rates, were considered in this study.