This thesis investigates the role of narrative as a compositional framework in music by drawing on Icelandic folklore as an external source of inspiration. The study explores how pre-existing stories can shape musical structure, thematic development, and expression. The primary objective is to compose and arrange three musical works based on selected Icelandic folktales, examining how musical elements such as melody, harmony, instrumentation, rhythm, and improvisation can represent characters, emotions, and events. Conclusions from rehearsals and the concert performance indicate that narrative awareness enhances performers' interpretations, thereby strengthening compositional clarity. Musicians reported that understanding the stories influenced their expressive choices and contributed to a more unified performance. Additionally, improvisation emerged as a significant tool for conveying emotional states, temporal transitions, and dramatic actions within the narrative framework. The study concludes that narrative can function as an effective and flexible guide in music composition, fostering creativity in structure and thematic development. While listener interpretation does not depend on knowledge of the underlying story, narrative-informed composition offers valuable direction for both composers and performers.