This paper will represent the pedagogy of Innovation Education in Iceland that is a new school policy within the Icelandic school system. In Innovation Education (IE) students are trained to identify needs and problems in their environment and to find solutions: this is referred to as the process of ideation. The main aim is to improve their social capital through general education. Innovation Education has taken form as a new cross curriculum subject called "Innovation and practical use of knowledge" as presented in the new National Curriculum from 2007. It has a place in the National Curriculum as a part of the new area for Information Technology and Technology Education. Innovation Education in this form can be said to be the result of 25 year's research work, aimed at developing this new model for education. This was done in cooperation between the school system and the work place. The paper presents how the curriculum subject has developed its character, the pedagogical framework it is based upon as well as the ideology behind it and its ethical value as a part of general education.