The Incredible History of Reykjavík
Iceland is such a fascinating small country, and Reykjavík is no different. I love that the history here dates back to the Vikings, and the fact that the city has only experienced significant growth in the last 200 years is quite remarkable. In this historic overview, I put together as much information as I could find on the history of Reykjavík to help you learn about this city before you hopefully visit it yourself.
In this article...
Settlement Era (9th–10th Century)
Reykjavík’s story begins in the late 800s when Norse settlers arrived in Iceland. According to tradition and the medieval Landnám sagas, Ingólfur Arnarson, a Norwegian chieftain, established a farmstead in what is now Reykjavík around 874 AD. There is a story in the sagas about how they discovered the location. When he was on a ship and the land was in sight, he cast his high seat pillars overboard and promised to settle where the gods decided to bring them ashore. Two of his slaves searched the coast for three years before finding the pillars in the bay of what eventually became Reykjavík.
He named the area “Reykjavík” or “Smoky Bay” because of the steam from the hot springs there. Ingólfur and his wife Hallveig and their descendants held sway over the region for a time. A small community grew around their farm and nearby hot springs, but in the centuries that followed, Reykjavík remained sparsely populated. The settlement era in Reykjavík set the stage for its later importance, even though for much of the Middle Ages it lay out of the limelight of Icelandic history.
Middle Ages & Danish Colony (11th-18th Centuries)
During the Middle Ages, Reykjavík was little more than farmland with a few houses. While Iceland’s first parliament, the Althing, was established in 930 AD at Þingvellir (Thingvellir) about 50 km east of Reykjavík, the capital area did not become a political centre. Instead, power moved to church seats like Skálholt and later Hólar, and the trading and administrative hubs were elsewhere. By the 1300s, Iceland had entered into union under the Norwegian (and later Danish) crown, and the island went through civil strife, the Reformation, and severe climatic and economic hardship. Reykjavík, however, remained a quiet area of farms and fishing outposts. For hundreds of years, it was almost forgotten, its name and early settlement history recorded only in saga literature.
Eighteenth-Century Revival
Reykjavík’s modern growth began in the 1700s. In 1752, the Danish king donated the Reykjavík estate to an Icelandic business corporation called Innréttingar. Led by entrepreneur Skúli Magnússon, this group established wool workshops on the site.
The wool industry was Iceland’s first large-scale factory enterprise and Reykjavík’s early economic base. Over the next decades, more houses were built, mainly to accommodate wool production and trade. Other small industries started, including fisheries, sulphur mining, agriculture, and shipbuilding.
Even so, Reykjavík remained a small community. The key turning point came in 1786 when Denmark lifted its monopoly on trade and granted Reykjavik the right to trade, making it one of only six privileged trading posts in Iceland (and the only one to retain its charter permanently). This effectively founded the town of Reykjavík. Danish traders dominated the economy initially, but commerce began to grow.
Nineteenth-Century Growth and National Awakening
In the 1800s Reykjavík transformed from a backwater to Iceland’s leading town. The population slowly rose as fishing, trade, and services expanded. Key developments included the opening of a fish market, shipbuilding, and the growth of a small merchant class. Crucially, Icelandic national consciousness was on the rise, and Reykjavík became its focal point.
In 1845 the Althing, which had been suspended, was re-established in Reykjavík (after a 50-year hiatus) in what was still a collection of buildings and farms. Bringing the Icelandic legislature to Reykjavík effectively made it the capital of the Danish-ruled island, even before full independence. Icelandic nationalist sentiment gained influence in the 19th century, and the idea of Icelandic independence became widespread. All important events in the history of the independence struggle were important to Reykjavik as well.
A proper parliament house was later built (completed 1881). Other milestones of this era included the 1874 granting of a constitution by the Danish Crown (on the 1000th anniversary of the Norse parliament), and the 1904 arrival of Home Rule with an Icelandic Minister for Iceland based in Reykjavík.
As Reykjavík’s importance grew, so did its institutions. In 1876 Iceland’s first newspaper, Vísir, was published in Reykjavík. The University of Iceland was founded in Reykjavík in 1911 (though classes began a few years later), and cultural activities like theatres, churches and sports clubs started appearing. By the early 1900s the town had electricity, schools, and basic urban amenities.
Reykjavík as Capital and Nationhood (Early 20th Century)
The early 20th century brought huge changes. World War I (1914–1918) spurred a boom in Iceland’s wool and fish exports, benefiting Reykjavík’s merchants and fishery fleet. In 1918, Iceland became a sovereign kingdom in personal union with Denmark, known as the Kingdom of Iceland, with Reykjavík as its capital; however, the Danish king remained the head of state.
Economically, the interwar years were a mixed bag. The Great Depression of the 1930s affected Reykjavík like everywhere else, causing unemployment and strikes; however, the fishing industry was growing overall. The town’s harbour became busier with new motorised trawlers, and Reykjavík consolidated its role as Iceland’s chief commercial port. By 1940, its population had already grown to tens of thousands and was still climbing.
World War II and American Influence (1940s–1960s)
During World War II, Iceland’s strategic location made Reykjavík a prize. In May 1940, after Nazi Germany occupied Denmark, British forces invaded Iceland and occupied Reykjavík without resistance; the taxi and truck drivers even assisted the invasion force, which initially had no motor vehicles. Later in 1941, U.S. troops replaced the British. The Allied presence transformed Reykjavík’s economy and infrastructure. The military built Reykjavík’s first airport and improved the harbour, roads and utilities. Many wartime buildings and housing appeared to accommodate soldiers and workers. The influx of foreign soldiers and money meant that post-Depression unemployment vanished and the city grew rapidly. Finally, on 17 June 1944, amid World War II, Icelanders proclaimed the Republic of Iceland and cut the last ties to the Danish crown. Reykjavík, with its parliament, government offices and growing urban population, became the capital of the new republic.
After the war, the Allied bases remained (most notably the U.S. base at Keflavík, near Reykjavík) and Iceland joined NATO in 1949. This provoked some protests in Reykjavík at the time, but overall, it led to continued American economic involvement. In the late 1940s and 1950s, Reykjavík experienced a rural-to-urban migration: mechanisation of agriculture and the draw of urban jobs caused people to move from the countryside into the capital. Reykjavík expanded with new suburbs, schools, and amenities. Geothermal heating systems were installed, making Reykjavík famous for district heating and public swimming pools heated by hot spring water. By the 1960s, the city had modernised considerably: private cars became common, theatres and cultural venues opened, and Reykjavík was indisputably Iceland’s bustling capital city.
Here is a great article about Reykjavik during World War II.
Economic and Cultural Modernisation (1970s–1990s)
In the 1970s and 80s Reykjavík continued to modernise and emerge culturally. In 1972 the city hosted the famous World Chess Championship match between Bobby Fischer and Boris Spassky – putting Reykjavík on the world map. The 1980s brought a gradual decline in fishing’s dominance of the economy, prompting many Icelanders (especially from farms) to move to the capital region in search of work. The banking and finance sector also grew, aided by deregulation in the 1990s, making Reykjavík a financial centre as well.
Culturally, Reykjavik has become a creative hub. The city fostered Iceland’s vibrant music scene (with bands like The Sugarcubes, Björk, and later Sigur Rós), as well as visual arts and literature. Reykjavík Arts Festival (started in 1970) and music festivals like Iceland Airwaves (launched in 1999) highlighted its growing cultural profile. The cityscape itself began to change: Hallgrímskirkja (a landmark modern church with striking architecture) was completed in 1986. In 1986 Reykjavík again made world news when President Reagan and General Secretary Gorbachev met here for a summit (the Reykjavik Summit on nuclear arms control), underscoring the city’s international importance during the Cold War.
Reykjavík in the 21st Century
Today, Reykjavík is a dynamic northern capital with a population of approximately 130,000–150,000 people (around two-thirds of Iceland’s population resides in the greater Reykjavik area). The city’s economy has diversified far beyond fishing. Tourism has boomed, with visitors drawn by the midnight sun, Northern Lights, geothermal spas (such as the nearby Blue Lagoon), and cultural attractions. Reykjavík’s city centre, with its colourful low-rise houses and nearby nature, draws many visitors.
The downtown area is pedestrian-friendly and features a variety of cafés, restaurants, and museums. Concert halls and cultural institutions have multiplied: Harpa Concert Hall and Conference Centre (opened in 2011) is a celebrated piece of modern architecture and home to the Iceland Symphony Orchestra. The city hosts international events and conventions, reflecting its global connections. Technology and creative industries are also important; Reykjavík (and Iceland as a whole) is seen as a centre for innovation in renewable energy, biotech, and internet culture.
Reykjavík has also faced challenges and changes in recent decades. The financial crash of 2008 deeply affected Iceland’s banks and economy, and Reykjavík saw large protests (the “Pots and Pans Revolution”) that led to changes in political leadership. The city recovered in the 2010s as tourism rebounded. Today Reykjavík promotes sustainability, leveraging its geothermal energy and clean environment. Urban planning emphasises green spaces, and cycling and public transit have improved.
The History of Reykjavík
Over its history, Reykjavík has evolved from a lone Viking farm into Iceland’s political, cultural and economic heart. Its development reflects Iceland’s own journey: from a remote island with scattered farmsteads, through centuries under foreign rule, to an independent, modern nation. Throughout, Reykjavík has grown steadily and absorbed waves of change – from industrialisation in the 1800s, through wartime transformation, to cultural renaissance and technological growth. Its identity is tied to the Icelandic language and lore (earning nicknames like “City of Sagas”), yet it is open and cosmopolitan for a small capital. Today, Reykjavík’s blend of Nordic heritage and forward-looking creativity makes it a unique and vibrant city on the world stage.
