7 Small Towns in Iceland for Stunning Landscapes, Waterfalls, and Adventures

Welcome to the land of fire and ice, where majestic landscapes, cascading waterfalls, and epic adventures await in small towns across Iceland. Nestled amidst the rugged terrain and dramatic fjords, these hidden gems are a haven for nature enthusiasts seeking a dose of jaw-dropping beauty. From the otherworldly landscapes of Vik to the enchanting charm of Grundarfjörður, prepare to be mesmerized by Iceland’s stunning scenery that will leave you breathless – both from its sheer magnificence and the occasional gust of chilly wind and rain! So grab your rain gear, layers, and get ready to explore these small towns and regions that pack an awe-inspiring punch.

I traveled to most of these towns via the Star Legend – a small ship from Windstar Cruises. It was a great way to get all the way around the island with ease…and dare I say a little luxury too. The ship mainly moved to new ports at night which meant that I was able to really optimize my time in Iceland by visiting small towns and experiencing the wildlife and landscape instead of driving all the time.

After cruising around the entire island and experiencing the hard-to-get-to communities, I rented a car for a couple of days to explore Southern Iceland in more detail. The ship itinerary didn’t stop in Southern Iceland – so it was my way to be able to experience all of Iceland’s small towns and best cities in 10 days total. Here are my favorite Iceland cities and towns I visited with some ideas of what you can do and see there.

What is the Biggest City in Iceland?

Reykjavik is the country’s capital and its largest town. Most visitors who travel to Iceland stop in Reykjavik. In fact – some people rarely leave the capital region if they are on a quick Iceland stopover. Even though it’s the largest city in Iceland, it still only has a population of 123,000, yet 60% of the Iceland population lives in Reykjavik.

It’s a super capital city full of museums, high-end restaurants, and shopping. I’ve spent time there in the past and decided to focus my time on the lesser-known areas and towns. I much prefer to get out and explore the far corners of a country, away from where everyone else goes. And that’s exactly what I did.

Things You’ll Find in Every Iceland Town and City

After spending a week traveling through the small towns in Iceland, there were a few things that stuck out to me; things that nearly every town had. After seeing these things multiple times, I concluded that they must be a part of the Icelandic culture.

Churches

Everywhere you look, you’ll find a church steeple point up out of the Iceland landscape. They will be found in big cities, fishing villages, small towns, and the most remote rural settings. Some are modern, like the ones in Reykjavik and Akureyri, some are quaint little things, and some are blue! They even have a stave church in Heimaey! The dominant religion is Lutheranism.

Rainbow Streets and Paths

Iceland is overflowing with rainbows…but not in the sky – on the ground. Nearly every small Iceland town you visit will have a rainbow road or path. It started in the town of Seyðisfjörður in 2014 to show its immense support for pride, diversity, and acceptance. The trend grew to the far corners of Iceland. So not only are the towns filled with colorful buildings, but you’ll also find picturesque rainbows – and plenty of street art.

Swimming Pools

Don’t forget to pack your swimming suit when traveling to Iceland! Every town, big or small, seems to have a swimming pool. And the locals actually go to them regularly – unlike the aforementioned churches! Pools are gathering places for Icelanders and are open every day. They are normally heated by natural hot springs – making it pleasant to visit at any time of year. So the Blue Lagoon is really considered a swimming pool in Iceland culture. There are a lot of local ‘rules’ to know about the swimming pools – so be sure to read up on the Iceland swimming pool etiquette before you jump in!

Hot Dogs

Rock up in any small village and you’ll likely find an Icelandic hot dog stand! I know that seems a bit weird – but hot dogs are a craze there – the ultimate Iceland fast food. And after having a number of them – let me tell you…they are delicious! They are made with lamb meat, all come with a butter-toasted bun, a special sweet mustard, fried onions, and ketchup.

A Nearby Waterfall

You don’t have to go far to get to a waterfall in Iceland towns. It is said that there are over 10,000 waterfalls in Iceland. Iceland’s weather is full of rain, snow, and glaciers – and all of that water has to go somewhere. Nearly every port stop we made had a nearby stunning waterfall to visit.

Iceland Waterfall Photo Tips

If you want to get cool, smooth, long-exposure pictures (like the one above), then here are a few Iceland Waterfall Photo Tips.

1. Using a DSLR or Mirrorless camera, bring a tripod and ND filter

2. If using an iPhone, you can still get slow shutter speed photos..just do this! Open the camera app – and tap the Live Photo button at the top. That nested circle thing at the top right. If it’s on, the app will briefly display LIVE. Take the picture. Find the photo in the Photos app (or tap the icon in the lower left of Camera, if you just snapped it now.) You’ll see this “LIVE” indicator in the top left if you’re looking at a LIVE photo. Tap the word LIVE which is actually a popup button, which lets you choose from several different effects that can be applied to a live photo. Tap “Long Exposure” – this will blur the water. It averages all the frames together and gives it the blurred effect. Just remember, if you are including a person in the photo, just make sure they stay completely still for a few seconds when you take the live photo.

3. Protect your gear from the water with a LensCoat RainCoat. You can still get to all of the controls, but you’ll protect your gear at the same time.

Iceland Towns to Visit

Heimaey Island – Vestmannaeyjabær

Heimaey is hard to reach because it’s an island off of the mainland, however, it’s well worth the sea adventure! It’s the only inhabited island of the Westman Island chain and is only 5 square miles. It has a fascinating recent volcanic history that has literally shaped the island and culture. The eruption in 1973 had the entire island evacuated in the middle of the night. The eruption continued for months. By the time residents were able to come back, most homes were buried in the ash and the island expanded by 1 sq mile.

Heimaey and the small town of Vestmannaeyjabær was a stop on our cruise, however, you can also take a ferry over from southern Iceland. Either way you go, the journey into the harbor around the sea cliffs is epic!

Things to do on Heimaey Island

See Puffins

Heimaey is where you’ll find the largest concentration of Puffins in Iceland. Sometimes you’ll find them ‘wandering’ through town – but most often you can drive or take a bus tour to the cliffs and view them.

Hike Up the Volcano

I took the time to hike up the Eldfell volcanic cone. It’s a quick hike but steep (720 ft up). It provides the best view of the town (if it’s not covered in fog). At the top, you’ll also be able to feel the heat still emitting from the mountain. There’s a hole where you can place your hand inside and feel the warmth like an oven. Of course, there are also many other hikes you can do on the island if you stay longer and hire a guide.

Volcano Museum

To learn more about the 1973 eruption, see pictures, and learn how the town was saved, be sure to check out the Eldheimar Museum in town – it’s fabulous! Open daily from 11:00 AM to 5:00 PM

Seydisfjordur

This charming town in east Iceland is rarely seen…and on my trip, I didn’t get to see it either! We had planned to stop there, however, due to the weather, we were unable to get into the port. These things happen when you are cruising to remote places and often the Captain has to make decisions based on weather. And since I really only write about places I’ve been to – I’ll send you off to the tourism site to learn more about this little town in Eastern Iceland.

Akureyri

This is the largest city outside of Reykjavik and is situated at the end of a long fjord(Eyjafjörður) on the North coast. Akureyri is known as Iceland’s “Capital of the North.” Don’t let its size fool you; this charming town packs quite a punch! Explore its picturesque streets lined with colorful houses as you try not to trip over adorable Arctic foxes (okay, maybe just in my imagination). There may not be Arctic foxes on the streets, but there are heart stoplights…and that’s pretty darn cool! Every red stoplight in town is heart-shaped…it makes you happy that you have to stop I guess.

Things to do Nearby

Forest Lagoon

Everyone knows of the Blue Lagoon, but on the north side of Iceland, you’ll find the Forest Lagoon. This new hot spring spa is nestled in a rare Icelandic forest which gives it a pretty unique setting. I loved going there since it wasn’t crowded and felt more local than the touristy Blue Lagoon. They have a couple of bars, a hot sauna, and a cold dip pool too.

Whale Watching

The Eyjafjörður fjord is home to many whale species and is considered the whale capital of Iceland. There are tons of options, however, I went on a RIB boat. These boats are fast and can maneuver quickly so you’ll be able to cover more ground, change directions, and get to the whales quicker than most of the other boats. We saw a number of humpbacks feeding during our morning zipping around out on the fjord whale watching!

Goðafoss Waterfall

It is said that 1000 years ago when Christianity became the official religion in Iceland, the statues of the old Norse Gods were tossed into this waterfall. This is why it’s considered the waterfall of the Gods. It sort of looks like a mini Niagra Falls as it spreads out wide across the landscape nearly 90 feet. There are pathways where you can get close to the water and viewing points on both sides of the falls.

Vadlaheidi Tunnel

I hired a local driver through Get Your Guide to take us to the Gadafoss Waterfall – but we ended up getting much more than a ride to the waterfall. Jonas was a wealth of information, gave us a town tour, provided the history and we even did a surprise stop inside the Vadlaheidi tunnel to learn more about the making of the tunnel. I could hardly believe it when he pulled over in the tunnel and he took us into a little room that had pictures of the making of the tunnel and how they overcame the water springs that were unearthed in the construction. It was quite an engineering feat!

Isafjordur

Located in the Westfjords the small, colorful town of Isafjordur is stunning surrounded by mountains and sea. There are a number of museums here such as the Heritage Museum, but definitely check out the Museum of Everyday Life to learn more about how people live in the area. You can also take nearby ATV tours, and go hiking.

Things To Do Nearby

Dynjandi Waterfall

Dynjandi Waterfall sits in the remote Westfjords of Iceland. It’s the biggest and the most impressive cascade in the region. Translating to “the Thunderer” in English, Dynjandi cascades 329 ft over terraces of basalt boulders. It’s made up of a series of 7 different waterfalls that spill out into the Fjord below.

There’s a great little path to the top that takes about 15 minutes to hike. At the top, you can take in some of the most awesome fjord views! The roar was real – like thunder!

Jón Sigurðsson Museum

Hrafnseyri is an old settlement that has links to Iceland’s independence. In addition to learning more about Iceland’s journey to independence, it’s also a perfect place to explore the traditional turf houses and old churches found in the countryside. In addition, there is a small coffee shop and a museum dedicated to Iceland’s independence hero Jón Sigurðsson who was born in Hrafnseyri.

Grundarfjörður

Burndarfjordor is probably the best-known town on the Snæfellsnes Peninsula. You’ll also see it in the movie The Secret Life of Walter Mitty in addition to the small fishing town of Stykkisholmur.

Things To Do Nearby

Puffin Watching

The fishing village of Stykkisholmur is a great location to see those adorable Puffins that Iceland is known for. We went on a ‘Viking Sushi tour’ for a half day where we could sail out to the surrounding islands and see the bird cliffs as well as do some fishing and eat the freshest and tastiest sea scallops I’ve ever had.

Penguins are my favorite bird…but Puffins are a close second for me. They are basically penguins that can fly! They always look like little footballs with wings to me. They flutter their wings wildly to get their oblong bodies airborne, which leaves you cheering for them fearful that they may drop out of the air!

Puffins arrive in Iceland in May and stick around until late August. You can see them in many places around Iceland’s cliffs, but Stykkisholmur was where we saw the most. Plus, the captain of the boat was able to get us so close to the cliffs for an incredible peek into their smelly world.

The Most Photographed Spot in Iceland

Grundarfjörður Kirkjufell Mountain and Kirkjufellsfoss Waterfall are the emblems of the town, towering over the sea dramatically with steep peaks and a three-pronged waterfall beside it. Sadly while we were the top was covered with moody clouds.

Vik

Vík í Mýrdal is the southernmost village in Iceland and is a favorite stop on many Ring Road Itineraries. Because it’s on the Ring Road, be warned, you won’t be alone. The little town was bustling with tourists when we were there. It’s a nice stop for lunch and a walk on the beach, but make sure you also head up into the town near the church where you’ll get spectacular views. Plus, Nearby you’ll find some of the most popular tourist stops in south Iceland.

Things to Do Nearby

Black Sand Beach and Sea Stacks

The South Coast is known for its volcanic activity. In fact the day we left the region another volcano erupted! You’ll find a number of black sand beaches in and around Vik created by the gradual erosion of lava and other volcanic materials, most of which are black or dark in color. If you simply park in Vik and walk out to the ocean you’ll encounter a long black sand beach. To your right, you’ll also find intricate sea stacks which just add to the beauty of Vik.

Church and Cemetery

You can’t help but notice the church in Vik. It sits high atop a hill peering down on the little town. You can drive up there and park to get a great view of the town. Plus, you can hike up the hill further on a footpath and take in sweeping views of a wildflower-filled valley as well as the cemetery. I love visiting cemeteries as I travel – and this one also has an incredible view.

Local Wool Shop

The little sandwich sign on the corner read Woolen Shop, so I decided to pop my head in. Normally these types of shops have some local older Icelandic women sitting and knitting big chunky wool sweaters by hand. However, when I walked into this shop in the basement of someone’s house it was a mini factory! A machine was weaving a wool rug, there were bindles of colorful wool thread sitting on shelves, and a woman and young boy were busy putting the final touches on some wool mittens.

Even though there were machines – this definitely wasn’t a modern operation. The owner eagerly walked us through the setup and explained the old machines that use thistles from the fields to brush the wool. In the back, you’ll find a shop with finished products you can purchase. I loved learning more about this industrial piece of Icelandic culture. It’s open to anyone who wants to stop in, learn more, and shop. It’s located just down the hill from the church.

Solheimajokull Glacier

Solheimajokull is nestled between the volcanoes Katla and Eyjafjallajökull and can easily be reached by car. There’s a big parking lot and a short walk will get you out to the terminus. We saw little ‘icebergs’ floating in the water in front of it and watched as scores of tour groups hiked on top of the glacier. It was great to see as it gave you an idea of just how big the glacier was.

Skógar

This is really more of a small village (population 25) that happens to be bookended by two waterfalls – one well-known, and one not so well-known.

Things to Do Nearby

Waterfalls

Skógafoss waterfall is the easiest to get to – and therefore the most crowded. However, it’s worth a stop as this 203 ft waterfall is a powerhouse. There really aren’t any tiers to Skógafoss so nothing to slow down the water – it’s just a solid, powerful flow. I wore my waterproof gear and waterproof shoes and was able to walk out into the stream to get a picture with relatively few people in it.

Kvernufoss waterfall is a little more off the beaten track on the other side of town. It’s not as big, but its seclusion is the part that makes it beautiful. We visited early in the morning at 6:30 AM and were the only ones around! You’ll need to follow an easy path into the canyon (a 15-minute walk) to get to Kvernufoss. The canyon walk is lovely, and the waterfall is even better. You can even walk behind this waterfall and peer out through the canyon.

Seljalandsfoss waterfall is another very popular tourist destination. Once again, we went at 6 AM and there were only 3 other people there – it was delightful! The waterfall is popular because you can walk entirely behind the waterfall and be protected under the overhanging cliff. However, you’ll still want your full waterproof gear on as you will get wet depending on which way the wind is blowing. If you wait until the afternoon, it’s illuminated by the sun, however, it will also be packed with people complete with a slow line of people waiting to go stand behind the waterfall.

Waterfalls with No One At Them

Off of Highway 261 just outside of Hvolsvöllur, you’ll find some hidden gem waterfalls where you will likely be the only one there at any time of day. A local told us about these and I couldn’t believe how tranquil, quiet, and beautiful they were. There is a sign and parking lot for Gluggafoss – a multi-tiered waterfall that you can go stand behind.

Further west along 261, you’ll find Drifandi Falls in Fljotshio – a lovely waterfall among a sheltered wooded area – a great place for a picnic! You won’t find this on Google Maps, you will just have to trust me that it’s there! There is a rough parking area and a sign for it along Highway 261. There was no one else in this magical little spot – it really felt like a secret. In addition, look carefully near the water’s edge on the east side and you’ll find mini traditional Icelandic homes built…so tiny most people probably miss them! I’m pretty sure there was some elf magic happening there.

Dímonarvegur Road and Hike

For a stunning view of the region near Seljalandsfoss, the glacier, and the snaking riverbed, don’t miss this short hike. I honestly don’t know what the name of this hill is, but you can’t miss it if you take Dímonarvegur Road (Road 250). It’s a gravel road but a 2-wheel drive can make it. There’s a hill (I’m not really sure what to call it…a bump…a hill…a mound…a mountain?) right along the road with a little parking area. Once you get up close you realize the ‘hill’ is actually quite steep and big, but there is a path that leads up to the top that anyone can take. Just be prepared for your calves to burn and your knees to scream on the way down the steep path.

But once you get to the top, the view is gasp-worthy. You’ll see the snaking river formed from the glacier, the mountains, valley, and glacier in the far distance. You will literally feel on top of the world!

How to Get To Iceland Towns

On my Iceland trip, I was able to experience two ways to get out and see the entire island – by car (the popular choice) and by small cruise ship (only 250 passengers). It was interesting to do both in the same trip as I was able to really see the advantages of each.

Iceland Cruise with Windstar Cruises

Cruising around Iceland on a small ship is a great way to get beyond the capital city and out to the small towns and villages all within one week’s time. For me, this is the Iceland I love – the remote towns, fishing villages, and lesser-visited attractions. It’s also a way to really experience the sea culture that is so strong in Iceland.

Windstar’s Star Legend ship was the perfect comfortable way to experience the whole of Iceland. We started in Reykjavik and went south in a counterclockwise direction around Iceland. The ship carried 300 passengers but only had 250 on board. I enjoyed incredible food and menus from James Beard Chefs, drinks, and lectures on Icelandic history. At each port, we were able to do excursions that were organized through Windstar or you could also just arrange your own. I did a little of both.

Experience Windstar’s Cruise Around Iceland – Reykjavik to Reykjavik

I mainly used GetYourGuide to arrange my own excursions in ports where I had more time or wasn’t interested in the Windstar options. They offer short day trips and half-day trips that often pick you right up from ports in Iceland!

One Hotel as You Travel Around Iceland

The cabins were spacious. Ummm – hello…we had a bathroom with two sinks…in a cruise cabin! That was certainly a first for me. Each cabin also has a sitting area and we even had a small balcony. I loved having the balcony to watch the seabirds glide alongside the ship just skimming the tops of the waves. Plus as we entered the port of Heimaey we could watch the sea cliffs go by while standing on our little balcony.

I think my favorite thing about cruising around Iceland was the ability to stay in one room the entire time and unpack once. This also made it super easy to plan this vacation since I didn’t have to search all over for hotel rooms which are notoriously scarce in Iceland. I unpacked, hung up my clothes, and was done…yet we moved every night to a new area…pure bliss.

In addition, Windstar offers an ‘all-inclusive’ package that includes all of your tips, and alcoholic drinks throughout the cruise – a pretty big benefit if you are a cocktail nerd like me. And the best part…I didn’t have to drive…so I could enjoy cocktails all night if I wanted to!

Overall – if you are short on time and don’t have the time to plan every little detail of a road trip, then this Windstar cruise around Iceland is the way to go. Plus – you’ll see the most comprehensive view of Iceland in just a week’s time, which is great for people who want to do it all but have limited vacation time (ahem…hello fellow Americans).

By Car

The key to exploring Iceland’s towns independently is to start your planning early. I looked for hotels 3 months prior to the vacation and I could barely find anything available. This is why we ended up staying in a shared hostel room with bunkbeds…it was all that was left! In addition, the same goes for car rentals – you have to get on this early and reserve as there is a limited supply.

Where to Stay in South Iceland
We stayed at Midgard Basecamp in Hvolsvöllur – a family-run guesthouse and hostel that was modern, welcoming, and helpful. I absolutely recommend it!

Of course, you get the freedom of a road trip and can stop whenever you want, go where you want, change your plans at a moment’s notice, and generally have full control – and there is beauty in that. One big advantage to me was that I could stop whenever I wanted to take a picture. As a photographer – that’s pretty important to me.

It was an easy country to drive in, however, if you get off the main roads – you’ll want to ensure that your rental car is the right type to take on the rough roads. There aren’t any hotel chains in Iceland outside of Reykjavik, so you’ll be staying in quaint little guest houses, and small hotels.

I always rent cars through RentalCars.com – I find they have the best prices on the Internet and are really easy to use and work with.

Don’t Go to Iceland Without This Gear

Waterproof is the magic word when you are traveling in Iceland in the summer. Between the rainy weather and the myriad of waterfalls – you’ll want waterproof everything…EVERYTHING. In addition, it’s still rather chilly in the summer – so you’ll also want layers. Here are some of the things I took that worked really well in this rainy, chilly environment. And don’t forget your swimsuit!

From the vibrant capital city of Reykjavik to the quaint and picturesque villages scattered along the coast, to the Westman Islands – each town has its own charm and beauty to explore. Whether you are captivated by the stunning landscapes, fascinated by the culture, mesmerized by the waterfalls, or seeking outdoor adventures, Iceland’s towns have something for everyone. So pack your bags and rain gear and embark on an incredible journey through this enchanting land of fire and ice!