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​​Where to Stay in Reykjavik: 8 Best Areas & Neighborhoods

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Are you planning a trip to Iceland? Iceland is an enchanting destination that everyone should visit at least once. Visitors are always amazed by the breathtaking scenery, friendly people, and unique island culture in this westernmost 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 874, so it’s had quite a few years to grow and develop into the exciting and special city 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, you may wonder which of these areas is best for you to stay in.

Truly, they are all lovely and offer options to suit various interests. Still, each has its own character, so some may match your personality and preferences better than others.

Read on to learn more about Reykjavik’s different neighborhoods and some of the best hotels in each. After reading this post, you’ll be better prepared to choose and reserve a hotel.

Downtown Reykjavik/City Center

Many first-time or returning visitors to Iceland stay in downtown Reykjavik. As you might imagine, this area is the city center known as Midborg. It’s a great place to stay in Reykjavik, as many things are within easy walking distance from 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. 

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

Accommodations in Downtown Reykjavik

Budget Hotel: Kvosin Downtown Hotel

Hotel Lobby with a Long Table with Chairs
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This great little property is one of the best budget hotels 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 Option: Skolavoroustigur Apartments

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There are several apartment hotels in Reykjavik, and they’re a great choice. You can spread out in the extra space and 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 and has an on-site restaurant, 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
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The historic Hotel Borg is one of Reykjavik’s most impressive older hotels, 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.

Over the last hundred years, many historical events have occurred here, and many famous people worldwide 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 you did.

Vacation Home: 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 immediately adjacent to the Church of Hallgrimir, and the Jonsson Sculpture Museum is also very close. 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

Reykjavik’s Old West Side neighborhood is adjacent to the Downtown Reykjavik/City Center area and is easy walking distance from it. Still, 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 Iceland’s many captains and sailors. 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, but its proximity to downtown makes it an attractive option for accommodations for visitors. You’ll feel more like a local than a tourist in this neighborhood.

Accommodation Options on the Old West Side

Budget Hotel: Hotel Reykjavik Centrum

Clean Hotel Room with a Flat Screen TV
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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 within walking distance of most of the major attractions of central Reykjavik. There’s a fantastic on-site restaurant and a separate onsite bar to enjoy.

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

Mid-Range Hotel: Icelandair Hotel Reykjavik Marina

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

Luxury Hotel: Black Pearl Apartment Hotel

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The Black Pearl is another apartment hotel, one of the more expensive accommodations in Reykjavik. You’ll get what you pay 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.

Vacation Home: 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 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 includes the Old West Side and extends to the city’s southern coast. It is Reykjavik’s westernmost neighborhood other than Seltjarnarnes.

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

However, Vesturbaer is more happening than the Old West Side because the University of Iceland and the National Museum of Iceland are there.

This area is full of locals and tourists, and there are plenty of places to get a bite to eat. If you like culture and college neighborhoods, Vesturbaer may be perfect for you.

Accomodations in Vesturbaer

Budget Hotel: Refurinn Reykjavik Guesthouse

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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, free parking, and WiFi, too.

Mid-Range Hotel: Grandi by Center Hotels

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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.

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

Luxury Hotel: Reykjavik Konsulat Hotel, Curio Collection by Hilton

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The Reykjavik Konulat Hotel is a beautiful, high-end property located in the perfect spot in Vesturbaer. It’s 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. The rooms are very comfortable, and you’ll surely get a great night’s sleep here every night.

Vacation Rental: Centrally Located Apartment with Sea Views

White House with Spacious Garden
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This three-bedroom, split-level apartment is within walking distance from downtown and popular geothermal pools. Wonderful shops, restaurants, coffee houses, and bakeries are nearby. The apartment overlooks the sea, and guests can enjoy the shared garden.


Seltjarnarnes is the westernmost neighborhood of Reykjavik. It’s a bit far from the city center and not exactly within 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 separate town entirely, it’s adjacent to Reykjavik proper, so many people consider it a part of it.

If you’re a nature lover, this is a great spot. 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 to view the northern lights in the wintertime.

Accommodations in Seltjarnarnes

Budget Hotel: Blue House B&B

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

The property is spread over three buildings. A continental breakfast is included for all guests. Many people stay here to view the Northern Lights.

Vacation Home: Family House with Ocean View

Overview of Living Area
Photo by VRBO

This lovely, 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, as well as 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 east of downtown. 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, spurring much revitalization in the neighborhood overall. If you enjoy up-and-coming areas, then Hlemmur will be perfect for you.

Accommodations in Hlemmur

Budget Hotel: Fosshotel Lind

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

Mid-Range Hotel: Hotel Klettur

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This is a great accommodation option for people who have never been to Reykjavik. This hotel includes free continental breakfast, brightly colored rooms, great views, private bathrooms, balconies, a car rental agency on-site, a souvenir shop, and a tour desk.

The staff is very helpful and will help you book tours. Everything is within walking distance, and there’s even service and WiFi. You can also exchange currency at the front desk.

Luxury Hotel: Midgardur by Center Hotels

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This hotel is located right on Laugavegur, Reykjavik’s main shopping area, and is also close to the city’s other top sights. The rooms are spacious and comfortable; most have views of the sea, mountains, or city. The hotel restaurant is especially good and offers fantastic Icelandic dishes.

Vacation Rental: Spacious, Downtown Reykjavik Apartment with Free Parking

Fully Furnished Apartment Living Area
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This open, modern apartment rental will be the perfect place 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 east of downtown that includes Hlemmur. This district is lively and diverse, but it’s also quiet and residential, so you can sleep well knowing you won’t be bothered by unnecessary noise at night.

You’ll find many budget hotels and hostels in this area. This neighborhood has a few casual restaurants, but if you’re looking for something more exciting or upscale, the downtown area is also within walking distance.

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…

Accommodations in Hlidar

Budget Hotel: Bus Hotel

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Bus Hostel offers dormitory options and 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

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

This property’s WiFi and breakfast buffet are top-notch, as is the on-site restaurant. It offers Icelandic cuisine combined with international flavors. The chefs try to use fresh, local produce whenever they can.

Vacation Rental: Newly Refurbished Duplex Flat

Spacious Bedroom with White and Wooden Designs
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This townhouse is in a quiet, residential area of Hlidar. It sleeps seven people in three bedrooms. It’s 1,295 square feet and has one bathroom, a kitchen, a living room, a dining area, and a small garden to enjoy.


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

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

Accommodations in Fossvogur

Vacation Rental: 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 in a green area. It only sleeps two, but there is plenty of space for you, and you’ll love the large bathroom.


Largardalur is a large Reykjavik neighborhood that includes the city’s northeastern coast and some area inland. This area is popular with Icelanders and visitors because it’s beautiful and has much to do.

First, this area has hot springs, hiking trails, and green open spaces. The Reykjavik Zoo, Botanic Gardens, and ice rink are also in this neighborhood, making it a great place for families. Get your own Reykjavík City Card to explore a selection of the best attractions and sights in the city.

The weather in this part of town is mostly mild, making it a perfect place for all those outdoor activities. And best of all? Even though you’ll feel like immersing yourself in nature in Laugardalur, you’re only a short distance from downtown and everything else.

Accommodations in Laugardalur

Budget Hotel: Hotel Muli

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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 centrally located in this neighborhood. It’s one of many Reykjavik hotels that offers family rooms and free Wi-Fi in all areas. There’s also a cafe and bar inside the hotel!

Mid-Range Hotel: R13 – A Townhouse Hotel

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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 for groups or guests traveling with children.

Luxury Hotel: Grand Hotel Reykjavik

Saeting Area at Grand Hotel Reykjavik
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There aren’t 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 try out the fitness center – access to the latter is free. There’s also a bar, a restaurant, and a free shuttle into the city during the daytime.

Vacation Rental: 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 nearby, and a bus stop to take you downtown is right outside.


What is the main shopping district in Reykjavik?

Laugavegur is Reykjavik’s main shopping district. As the city’s oldest shopping street, it is known for a wide variety of shops, including boutiques, designer labels, and local Icelandic brands. It is a bustling, pedestrian-friendly area with restaurants, cafés, and art galleries.

Where in the world is Reykjavik located?

Reykjavik is Iceland’s capital. It is located in the southwestern part of the country, on the southern shore of Faxa Bay. Despite its northern location, the warm waters of the Gulf Stream temper Reykjavik’s climate.

Is Reykjavik, Iceland, expensive?

Reykjavik, Iceland, is generally considered to be an expensive destination. Living and travel expenses, including accommodation, dining, and activities, are typically higher than in many other countries. Despite this, Reykjavik’s unique natural beauty and cultural experiences often make it worth the extra expense for visitors.

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