The Croatians produced a dominating 32-21 victory which sent them to top of Group B and kept them unbeaten with one game left in the group stage.
Iceland edged the French 30-29 in a determined performance which moved it into first place in Group A with four wins out of four. It was France's first defeat of the tournament.
Also Saturday, Julen Akizu Aguinagalde scored nine goals as Spain topped Hungary 33-22 to go into second in Group B, and Johan Sjostrand saved 62 per cent of the shots he faced to help Sweden beat Argentina 29-13 in Group A.
Niclas Ekberg scored nine goals for Sweden, which outscored Argentina 17-5 in the second half.
Sweden had already clinched a spot in the quarterfinals, while Argentina will play Tunisia on Monday to determine which team advances.
Tunisia kept its hopes alive with a 34-17 victory over Britain to improve to 1-3 in Group A. Aymen Toumi scored 10 goals for Tunisia.
In Group B, Serbia defeated South Korea 28-22 for its first win of the games thanks to five goals each from Alem Toskic and Ivan Nikcevic.
South Korea was eliminated with the loss, falling to 0-4.
Both Croatia and Denmark had already qualified for the quarterfinals by winning all four of their games going into Saturday's matchup.
Croatia's victory was built on speed and accuracy up front and defensive toughness at the back.
Croatia goalkeeper Mirko Alilovic was surprised by the margin of his team's victory.
"I was expecting a tough game but we won easily," he said. "It's unbelievable the way we are winning these games. We are playing really the best defence in this tournament. If we continue to play like this we will go to the final and in the final anything can happen."
Igor Vori and Domagoj Duvnjak led Croatia's forwards with five goals each in a game which remained close for much of the first half before Croatia opened up a lead just before half time.
Denmark coach Ulrik Wilbek said he was impressed with the Croatian performance.
"I don't think I have ever seen them better," he said, adding that his team "had a collective off day."
"The shots were not very good and the defence didn't work for us today so we lost to a better team in all aspects."
France, the reigning Olympic champion, was behind for most of its game against Iceland.
With chants of Allez Les Bleus reverberating around the Copper Box, the French fought back and equalized to make it 15-15 with 20 seconds left in the first half. But at the end of a tight second half Iceland took control.
Iceland goalkeeper Bjorgvin Pall Gustavson paid tribute to the fans in the handball arena.
"It felt great, the place was blowing up," he said. "There was a lot energy in the arena and of course a win against France doesn't happen every day.
"We were playing against one of the best teams in the world, if not of all time. It is two big points, gives us the first place in the group and gives us great confidence for the upcoming games. Of course we want to go all the way. We are taking it step by step."
French goalkeeper Thierry Omeyer said his team remained confident despite the defeat. "It's only one game and we have to get better next game," he said.