We describe a high-performance molecular iodine optical frequency reference that is referenced to the R(56)32-0: a1 hyperfine transition of molecular iodine based on modulation transfer spectroscopy. We design an unsaturated iodine vapor cell with a gas pressure equivalent to the saturation pressure at −17 °C. Using this cell, we developed a compact, frequency-stabilized laser. The iodine cell operates at room temperature and is not actively temperature stabilized. We demonstrate a laser with fractional frequency instability of 1.4 × 10−14 at 1 s and 1.7 × 10−15 at 104 s. To our knowledge, the level of frequency instability at 104 s is comparable to the previously reported best results for an iodine stabilized laser. These results suggest that using an unsaturated iodine vapor cell is a valid approach for the development of long-term, stable iodine-based optical references.