The country's parliament unanimously passed the Icelanding Modern Media Initiative (IMMI), a resolution to protect journalists and their sources, in June.
"We took all the best laws from around the world and pulled them together, just like tax havens do, in order to create freedom of information and expression, a transparency haven," said Birgitta Jonsdottir, the member of parliament behind the initiative.
Jonsdottir, a self-described anarchist, said she went into politics after observing the censorship and corruption that came to light during Iceland's economic collapse at the end of 2008.
"Freedom of information and freedom of speech are the pillars of democracy," she said. "If you don't have that, you don't really have a democracy."
She says the IMMI will strengthen source protection and encourage whistleblowers to leak information.
Assange, who became widely known last month when WikiLeaks published nearly 77,000 classified US military documents on Afghanistan, said such protections are becoming necessary.
"That's our experience in the developing world and in most developed countries: that the press is being routinely censored by abusive legal actions," he said in a YouTube video.
Jonsdottir said the IMMI will have implications for journalists whose articles are published in Iceland but who reside in countries where their lives are in danger.
"We can't help them with that, but at least we can ensure their stories won't be removed" from the Internet, by posting them on servers located in Iceland where censors cannot get them, she said.
According to Jonsdottir, it will take about a year and a half to change the laws required for the IMMI to go into effect.