Arna Ýr Jónsdóttir said staff from the popular contest, Miss Grand International, told her to eat less ahead of the final.
In a "goodbye" letter posted on Instagram
Monday, she wrote: "I am a very strong woman, but sometimes my strength isn't enough.
"Your staff told me that I had to lose weight for the finals because I have too much fat on me and also too big shoulders."
In a statement, the president of Miss Grand International Organization, Nawat Itsaragrisil, said that when Jónsdóttir asked his staff about her weight, they said she "may be a little bit fat" and recommended that she try to lose some weight to win.
He added: "This is a normal process for the three weeks during the pageant, everyone should show their improvement.
"Similarly the staff give the same advice for others who asked what should they do to improve in order to win."
He said that he had spoken with Jónsdóttir along with the company's vice president and clarified matters, adding that "all seems fine."
The 20-year-old from Reykjavik said she was told that the pageant in Las Vegas would like her more if she ate less.
"I decided to leave ... Miss Grand international doesn't deserve my face, body, personality or heart."
The Icelandic model, who has been a gymnast since she was 10, said she hopes the pageant organizers "open their eyes."
"The year is 2016 and if you are gonna hold an international pageant you have to be able to see the international beauty."
Praised for quitting
Jónsdóttir has received support across social media for speaking out on the issue.
One user wrote
it was "supercool" that the model told the contest "to shove it" when "told to eat air in prep for the competition."
Another said: "Miss Iceland is great and I hope this starts a revolution because pageants are dumb and set women up for disappointment."
The winner of the pageant, who will be crowned Wednesday evening, is expected to be an advocate for the Stop The War and Violence campaign, the pageant says, and part of her duties may include visiting refugee camps.
So, what now for Jónsdóttir?
She says she'll stay in Las Vegas
until Wednesday to explore the city and and most importantly, "eat good food."