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The draw, which was made in Nyon this morning, has pitted the Bhoys against the reigning Icelandic champions.
Celtic avoided a rematch with Northern Irish champions Cliftonville, whom they beat 5-0 on aggregate at the same stage of the competition last season.
They have also avoided a two-legged tie against Norwegian outfit Stromsgodset, the former club of their new manager Ronny Deila.
The first legs will take place on July 15 and July 16, with the return legs being played on July 22 and July 23.