Legend has it that the world's most northerly capital was founded by Norwegian and Celtic immigrants during the late 9th and 10th centuries. A Viking called Ingólfur Arnarson named the place Reykjavik (Smokey Bay) after the steam rising from the hot springs.
Reykjavik developed slowly from a handful of farmhouses until the middle of the 18th century, when a small trading community began to grow. This was thanks to a Dane called Skuli Magnusson, known as the Father of Reykjavik, who established wool workshops in an effort to modernise the Icelandic economy. Wool became a major employer and ignited further urban development and the rise of other industries such as fishing, agriculture and ship building.
In 1786, Reykjavik received its town charter. In 1798 the Althingi (Icelandic Parliament) at Thingvellir in the south west was abolished and re-established in Reykjavik where the country’s government and administration were now based. Danes continued to dominate trade however, as a result of a monopoly ruling by the Danish Crown. It wasn’t until 1880 that this was abolished and the influence of Icelandic merchants grew.
At the same time in the 19th century, nationalist sentiments were growing. In 1874, Iceland was granted a constitution. By 1918, Iceland had become a sovereign country under the Crown of Denmark known as the Kingdom of Iceland.
The impact of WWII was positive for Iceland. Following the German occupation of Denmark and Norway in 1940, it was the allies who came to occupy the island and who were instrumental in building two airports, one of which was at Reykjavik. In 1944, Iceland won Home Rule and then independence from Danish rule and Reykjavik became the capital of Iceland.
With the rapid economic progress of the 20th century, Reykjavik grew steadily attracting residents from the countryside and becoming a modern city.
When Reagan and Gorbachev played out the end game of the Cold War in Reykjavik in 1986, the city emerged as an unlikely tourist destination. International music acts such as Bjork and Sigur Ros have helped create a fashionable image for the city, and many young people head there, especially for the music festivals. In addition, the city has become famed for its weekend nightlife scene with over 100 bars and clubs.
The economic crises of 2009 and 2010 hit the local economy hard. The city and country also came under the spotlight that year when the Eyjafjallajokull volcano erupted, leading to a massive ash cloud drifting into the skies above Europe that resulted in the grounding of more than 100,000 international flights and the stranding of millions of holidaymakers. The eruption of another volcano in 2011 put most of Europe on high alert but only affected flights within the country.
Although it still feels like a provincial town, with its low buildings and brightly painted houses, Greater Reykjavik is home to three out of five Icelanders and the diminutive city dominates Iceland politically, socially, economically and culturally. It is surprisingly diverse, and is home to people from at least 100 different countries, particularly Poles, Filipinos and Danes.