A Freedom of Information request has revealed the council’s pension fund invested £3.6m in tobacco companies over the past 12 months.
The request showed investment in the harmful industry has declined since September 2017.
There was no investment in tobacco by the council’s pension fund in June, July or August 2018.
In contrast, Hampshire County Council recently came under fire for investing £80m into the tobacco industry despite running anti-smoking campaigns.
IWC’s public health team say they follow the smoking cessation policy from Public Health England – a national framework.
A spokesman for IWC said: “The Isle of Wight Council Pension Fund has a fiduciary duty to ensure it has sufficient funds available to pay pensions.
“In light of that obligation, and in order to maximise investment return, the fund has a diverse range of investments and does not restrict managers from choosing certain stocks, including tobacco companies.
“The investment strategy is regularly monitored.”