Academics advise women of child-bearing age to maintain iodine in their diets by eating dairy products and fish.
Women were warned not to take seaweed pills, as they contain too much iodine.
Iodine is essential for the development of the brain as it is needed to build some of the body's hormones.
A severe deficiency is the leading cause of preventable brain damage in the world.
Researchers at Surrey and Bristol Universities looked at iodine levels in urine samples taken from pregnant women in south-west England.
It showed that iodine deficiency was common - affecting two-thirds of women.
Their children went on to have slightly lower IQs at the age of eight and worse reading ability aged nine.
"We saw a three-point IQ difference between children who were born to mothers with low iodine in early pregnancy and children who were born to mothers above the cut-off," Dr Sarah Bath told the BBC.
The researchers said this "may prevent a child reaching their full potential" and was an "important public health issue."
The study is published in the journal Lancet.