8 Best Areas & Fun Neighborhoods

Are you planning a trip to Iceland? Iceland is an enchanting destination that everyone should visit at least once in his or her life. Visitors are always amazed and impressed by the breathtaking scenery, friendly people, and unique island culture that they find in this easternmost country of Europe.

Anyone visiting Iceland will likely fly into Reykjavik as it is where the nation’s largest international airport is located. Reykjavik is also Iceland’s largest city and biggest population center.

However, with that in mind, some might be surprised to learn that the population of this capital city is just over 133,000 people.

Don’t let the small-sounding size of this city dissuade you, though. After all, the population of Iceland overall is just 369,000, which means under a third of Icelanders live in the capital city.

Further, according to legend, Reykjavik was founded in the year 874, so it’s had quite a few years to grow and develop into the exciting and special city that it is today.

But where to stay in Reykjavik?

Many visitors are surprised at the number and variety of neighborhoods in this relatively small city. If you’re planning a visit, then you may wonder which of these areas is best for you to stay in.

Truly, they are all lovely and they all offer something for everyone, but each has its own character, so some of them may match better with your personality and preferences than others.

To learn more about some of the different neighborhoods in Reykjavik and some of the best hotels in each of them, read on. You’ll be a lot better prepared to choose and reserve after reading this post.

Downtown Reykjavik/City Center

Many first-time or even returning visitors to Iceland choose to stay in downtown Reykjavik. This area, as you might imagine, is the city center and is also known as Midborg.

It’s a great place to stay in Reykjavik as many things are within easy walking distance from all of the popular hotels.

There are dozens of excellent bars and restaurants, so if you wish to check out Icelandic nightlife, this is the best place for you to be.

During the day, there is plenty to do in downtown Reykjavik as well. 

Again, this is the city center, so many of the city’s most popular tourist attractions are in downtown Reykjavik as well including the Church of Hallgrimir, the Reykjavik Art Museum, the Harpa Concert Hall, several art museums, and more.

Where to Stay in Downtown Reykjavik

Budget Hotel

Kvosin Downtown Hotel
Hotel Lobby with a Long Table with Chairs
Photo by Booking.com

This great little property is one of the best budget hotels you’ll find anywhere. It’s located just behind Reykjavik Cathedral and the Icelandic Parliament and everything is within easy walking distance.

The building dates back to 1900. Free continental breakfast is served every morning and there are even kitchenettes in most of the rooms.

There’s a bar in the building and a terrace on the roof. You can’t go wrong with this hotel, and it’s very affordable, too.

Mid-Range Hotel

Skolavoroustigur Apartments
Bedroom with Two Beds Covered in White Linen
Photo by Booking.com

There are a number of apartment hotels in Reykjavik and they’re a great choice; you can spread out a bit in the extra space and you can also enjoy the benefits of a kitchen in your room.

The Skolavoroustigur Apartments is a great mid-range option of this type. It’s close to everything, has a restaurant on-site, city views, and free WiFi. Rooms are spacious and many have balconies.

Luxury Hotel

Hotel Borg by Keahotels
Building Front of Hotel Borg by Keahotels at Night
Photo by Booking.com

The historic Hotel Borg is one of the most impressive older hotels in Reykjavik, if not the most impressive. It opened in 1930 and it is beautiful inside and out.

It was designed in Art Deco style and stepping inside will transport you to a different time.

Many historical events have occurred here over the last one hundred years and many famous people from all over the world have slept within its walls. Join them by booking one of this hotel’s 99 rooms during your stay in Reykjavik – you’ll be glad that you did.


Luxury Suite Apartment in Downtown Reykjavik
Fully Furnished Suite with a Table and Chairs
Photo by VRBO

This two-story rental sleeps six in two bedrooms and is roomy and modern.

It’s right in the city center and is immediately adjacent to the Church of Hallgrimir and the Jonsson Sculpture Museum is very close as well. The kitchen is fully equipped and there is free private parking downstairs.

See Related: Do You Need a Car in Iceland? Things to Know

The Old West Side

The Old West Side neighborhood of Reykjavik is adjacent to the Downtown Reykjavik/City Center area and is easy walking distance from it, but you might prefer to stay in this area instead of the busy downtown.

In contrast to its somewhat bustling neighbor, the Old West Side is quiet and residential.

This neighborhood developed after downtown Reykjavik and was historically home to some of the many captains and sailors of Iceland. Many of the homes are quite beautiful.

You won’t find much to do in the Old West Side and you won’t find many places to eat, either, but its proximity to downtown makes it an attractive option for accommodations for visitors and you’ll feel more like a local than a tourist in this neighborhood.

Where to Stay in the Old West Side

Budget Hotel

Hotel Reykjavik Centrum
Clean Hotel Room with a Flat Screen TV
Photo by Booking.com

This hotel isn’t “budget” according to our normal standards for this category, but it’s not cheap to stay on the Old West Side and this is the cheapest hotel in this neighborhood on our list.

It’s still affordable for most and it’s in a great location that’s within walking distance of most of the major attractions of central Reykjavik. There’s a fantastic on-site restaurant and also a separate onsite bar for you to enjoy.

Even more interesting, the hotel was built on top of a Viking-era longhouse, and Iceland’s oldest human remains – which date back to the year 870 AD – are on display along with other information about this historical and archeological site.

Mid-Range Hotel

Icelandair Hotel Reykjavik Marina
tables and Chairs on a Lobby
Photo by Booking.com

This property is classy for the price and many rooms have balconies and views of the sea and the harbor. Everything is close and it’s popular with business travelers and tourists alike. There’s a restaurant, gym, and bar on-site, and rooms have refrigerators and free WiFi.

Luxury Hotel

Black Pearl Apartment Hotel
Bedroom with a Huge Bed and a Mirror Cabinet
Photo by Booking.com

The Black Pearl is another apartment hotel and it’s one of the more expensive accommodations in Reykjavik.

However, you’ll get what you pay for here as this hotel is very nice.  It’s located right by the harbor and every room is decorated with comfortable furniture and great color combinations.

There’s also free parking. You can choose from a studio, a one-bedroom, or a two-bedroom apartment, with the largest rooms being over 1,500 square feet. Many rooms have balconies, too.


House of the Snowbird
Red House with White Roof
Photo by VRBO

This apartment rental is small and only sleeps two but you’ll feel like a real local when you stay at House of the Snowbird.

The house was built around 1900 and is currently owned by a family of artists who have left their personal touches everywhere. The location is excellent and you’ll be close to galleries, cafes, restaurants, the harbor, and more.


The Vesturbaer neighborhood actually includes the Old West Side neighborhood but it also extends to the city’s southern coast and it is Reykjavik’s westernmost neighborhood other than Seltjarnarnes.

Like its Old West Side section, much of it is also quiet and residential and much of it is within easy walking distance from the attractions and restaurants in the downtown area.

However, due to the fact that the University of Iceland and the National Museum of Iceland are in Vesturbaer, you will find it to be a bit more happening than the Old West Side.

You’ll encounter locals and tourists alike in this area and there are plenty of places to get a bite to eat, too. If you like culture and college neighborhoods, Vesturbaer may be perfect for you.

Where to Stay in Vesturbaer

Budget Hotel

Refurinn Reykjavik Guesthouse
Bedroom with Blue and White Wall Paintings
Photo by Booking.com

This budget hotel is not as inexpensive as some of the hostels in Reykjavik but you can enjoy a private room here for a bit more.

Rooms and amenities are rather bare-bones but everything is comfortable and pleasant. There’s a shared kitchen space for you to use and bathrooms are also shared. Rooms come with linens and there’s free parking and free WiFi, too.

Mid-Range Hotel

Grandi by Center Hotels
Colorful Chairs and Tables on a Lobby
Photo by Booking.com

This colorful and comfortable property is near the western edge of Vesturbaer and the marina, so it’s not as close to downtown as some others on this list, but it’s a lovely choice nonetheless.

Rooms are average in size and a buffet breakfast is included. There’s also a concierge and tour desk on-site to help you schedule some activities for your Reykjavik adventure.

Luxury Hotel

Reykjavik Konsulat Hotel, Curio Collection by Hilton
Room with One Bed and a Chair
Photo by Booking.com

The Reykjavik Konulat Hotel is a beautiful high-end property that is located in the perfect spot, in Vesturbaer, but also so close to everything you’ll want to see and do in Midborg. Every room has a balcony and the views are spectacular.

You’ll only be a few minutes walk from everything, or you can enjoy your meals in the onsite restaurant or via room service in your room.

You can even exchange currency at the front desk. Rooms are very comfortable and you’re sure to get a great night’s sleep here every night.


Centrally Located Apartment with Sea Views
White House with Spacious Garden
Photo by VRBO

This three-bedroom, split-level apartment is within walking distance from downtown and popular geothermal pools.

There are also wonderful shops, restaurants, coffee houses, and bakeries nearby. You can see the sea from the apartment and you can also enjoy the property’s shared garden as well.


Seltjarnarnes is the westernmost neighborhood of Reykjavik. It’s a bit far from the city center and it’s not exactly walking distance, but if you have a rental car it can be an excellent place to stay.

Although Seltjarnarnes is not technically a part of the city and is its own, separate town entirely, it’s adjacent to Reykjavik proper so many people consider it to be a part of it.

If you’re a nature lover, this is a great spot for you.

Chances are, you’ll be headed out to the more rural parts of Iceland to view its natural wonders at some point, but in the meantime, visitors who stay in Seltjarnarnes can walk the local trails and take in the gorgeous coast.

Birdwatchers love Seltjarnarnes – over 110 different species have been spotted here – and this thin peninsula is also a great place from which to view the northern lights in the wintertime.

Where to Stay in Seltjarnarnes

Budget Hotel

Blue House B&B
Color Blue House and Skyline
Photo by Booking.com

This special bed and breakfast is affordable, only a four-minute walk from the beach and a five-minute walk from a popular geothermal pool. You can choose from rooms that have shared bathrooms and kitchens or choose a full apartment that is self-contained.

The property is spread out over three buildings. A continental breakfast is included for all guests. Lots of people stay here to view the northern lights.


Family House with Ocean View
Overview of Living Area
Photo by VRBO

This lovely, recently renovated, 2,300 square foot home has five bedrooms and can sleep up to eight people.

There is a huge kitchen and area for gathering and a big balcony with a sea view. One of the best swimming pools in Iceland is a short walk from the house.


Hlemmur is a tiny neighborhood just to the east of the downtown area.

Because of its location, it’s within easy walking distance of anything you might want to do in the city center, but you’ll be happy to hear that you can get great food right outside your hotel door; this area is great for foodies.

In 2017, the city refurbished the old bus station into a large, varied food hall, and that spurred much revitalization in the neighborhood overall. If you enjoy up-and-coming areas, then Hlemmur will be perfect for you.

Where to Stay in Hlemmur

Budget Hotel

Fosshotel Lind
Empty Fosshotel Lind Hoel Lobby
Photo by Booking.com

Fosshotel Lind is in the middle of everything. It has free parking and offers a Scandanavian buffet breakfast every morning. If you need to get work done during your visit, there’s a computer lounge, but there’s also free WiFi. in the rooms. Rooms are average in size and many have great views.

Mid-Range Hotel

Hotel Klettur
Hotel Seating Area
Photo by Booking.com

This is a great accommodation option for people who have not been to Reykjavik before. This hotel has everything including free continental breakfast, brightly colored rooms, great views, private bathrooms, balconies, a car rental agency on-site, and a souvenir shop and tour desk.

The staff is very helpful and will aid you in booking tours. Everything is within walking distance and there’s even from service and WiFi everyone, and you can exchange currency at the front desk, too.

Luxury Hotel

Midgardur by Center Hotels
Bed Facing the Windows
Photo by Booking.com

This hotel is located right on Laugavegur, Reykjavik’s main shopping area, and is close to all of this city’s other top sights too.

The rooms at this hotel are spacious and comfortable and most rooms have a view of the sea, the mountains, or the city. The hotel restaurant is especially good and offers up fantastic Icelandic dishes.


Spacious, Downtown Reykjavik Apartment with Free Parking
Fully Furnished Apartment Living Area
Photo by VRBO

This open, modern apartment rental will be the perfect place for you to stay during your visit to Reykjavik. It has four bedrooms and is 2,207 square feet in size.

A walk of only a few minutes will take you downtown, to the bus terminal, to the main shopping and dining street, or to an indoor/outdoor swimming pool with a sauna and hot tub.


Hlidar is a larger neighborhood to the east of downtown that actually includes Hlemmur. In general, this district is lively and diverse, but at the same time, it’s quiet and residential, too, so you can sleep well knowing you won’t be bothered by unnecessary noise at night.

You’ll find a lot of budget hotels in this area, and hostels, too. There are a few casual restaurants in this neighborhood but if you’re looking for something a bit more exciting or upscale, the downtown area is within walking distance as well.

It’s also the home of the unique (but not-for-everybody) Icelandic Phallological Museum, where you can view a large collection of animal penises if you so desire…

Where to Stay in Hlidar

Budget Hotel

Bus Hotel
Glass Building Front of Bus Hostel
Photo by Booking.com

Bus Hostel offers dormitory options as well as affordable, private rooms with shared bathrooms. It’s very close to Perlan and the Saga Museum.

There’s a bar, an airport shuttle, free WiFi, and a shared kitchen. This is a great hostel if you want to travel on a budget and meet other travelers during your stay.

Mid-Range Hotel

22 Hill Hotel
Spacious and Clean Bedroom
Photo by Booking.com

The 22 Hill Hotel is in an excellent location and has large, comfortable rooms with flat-screen televisions that have international channels.

The WiFi and breakfast buffet at this property is top-notch, as is the onsite restaurant – it offers Icelandic cuisine combined with international flavors and the chefs try to use fresh, local produce whenever they can.


Newly Refurbished Duplex Flat
Spacious Bedroom with White and Wooden Designs
Photo by VRBO

This townhouse is in a quiet, residential area of Hlidar and it sleeps seven people in three bedrooms. It’s 1,295 square feet in size and has one bathroom, a kitchen, a living room, and a dining area, as well as a small garden for you to enjoy.


Fosssvogur is southeast of the more populated parts of Reykjavik and is another great option for nature lovers. This area is quiet and serene and residential.

Perlan, a popular landmark, and museum are within walking distance, but downtown is a bit further off. However, if you choose to stay in Fossvogur, you can spend some time in this neighborhood’s forest, or walk along the geothermal beach nearby.

Where to Stay in Fossvogur


Bright and Cozy Studio Apartment
House Front Yard and Graden
Photo by VRBO

Because Fossvogur is mostly residential, you won’t find many hotels in this neighborhood.

That’s why it’s a great place to stay if you want to live like the locals. This studio apartment is inside a home but is private and is in a green area. It only sleeps two, but you’ll find that there’s plenty of space for you and you’ll love the large bathroom.


Largardalur is a large neighborhood of Reykjavik that includes all of the city’s northeastern coast, and quite a bit of area inland as well. This area is popular with Icelanders as well as visitors because it’s beautiful and there’s a lot to do.

First of all, this area is just full of hot springs, hiking trails, and green, open spaces. The Reykjavik Zoo, Botanic Gardens, and ice rink are in this neighborhood as well, making it a great place for families.

The weather in this part of town is mild most of the time, which makes it a perfect place for all those outdoor activities.

And best of all?

Even though you’ll feel like you’re immersing yourself in nature in Laugardalur, you’re only a short distance from downtown and everything else.

Where to Stay in Laugardalur

Budget Hotel

Hotel Muli
Upclose Shot of Hotel Muli Building Front
Photo by Booking.com

This affordable property has simple but comfortable, modern rooms and some have extra seating areas for relaxing.

All rooms at Hotel Muli have private bathrooms and the hotel is in a central location for this neighborhood. It’s one of many Reykjavik hotels that offers family rooms and free WiFi in all areas and there’s a cafe and bar inside the hotel, too!

Mid-Range Hotel

R13 – A Townhouse Hotel
Bed with White and Yellow Linen
Photo by Booking.com

This boutique hotel has beautifully decorated chic rooms that welcome guests with warm colors that seem to fit in well in Reykjavik. It’s in a very good location near museums, the stadium, and shopping areas.

Continental breakfast is available daily and you can enjoy it while you watch the flat-screen TV in your room. Family rooms provide more space and kitchenettes that are great for groups or for guests traveling with children.

Luxury Hotel

Grand Hotel Reykjavik
Saeting Area at Grand Hotel Reykjavik
Photo by Booking.com

There aren’t that many luxury hotels in Reykjavik but the Grand Hotel is one of them! This property has rooms that look outward into the beauty of Iceland and others that look inward into the hotel’s atrium.

You can enjoy treatments at the on-site spa and also try out the fitness center as well – access to the latter is free. There’s also a bar and a restaurant, and there’s a free shuttle into the city during the daytime.


Cozy Centrally Located Mid-Century Modern Villa
Cars Parked In Front of a White Villa
Photo by VRBO

This modern house sleeps seven people in four bedrooms and has two full baths, a kitchen, a living room, and a deck. You’ll also enjoy a flat-screen TV, WiFi, and three balconies. Many attractions, shops, and restaurants are close by, and a bus stop to take you downtown is right outside.

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