The first permanent settlement in Iceland by Norsemen is believed to have been established at Reykjavík by Ingólfur Arnarson from Norway around AD 870; this is described in Landnámabók, or the Book of Settlement. Ingólfur Arnarson is said to have decided the location of his settlement using a traditional Norse method; he cast his high seat pillars (Öndvegissúlur) into the ocean when he saw the coastline, then settled where the pillars came to shore. The story about the pillars of course to many people is a bite hard to swallow. He obviously settled near the hot springs to keep warm in the winter and wouldn't have allowed it to be determined by happenstance. Furthermore the probability of the pillars drifting to that location from where they were said to have been thrown from the boat seems improbable. Nevertheless that is what the Landnamabok says and says furthermore that Ingolf's pillars are still to be found in a house there in town. Steam from hot springs in the region is said to have inspired Reykjavík's name, which loosely translates to Smoke Cove (the city is sometimes referred to as Bay of Smoke or Smoky Bay in English language travel guides). In the modern language, as in English, the word for 'smoke' and the word for fog or steamy vapour are not commonly confused but this is believed to have been the case in the old language. The original name was Reykjarvík with an additional "r" that had vanished around 1800.
Reykjavík is not mentioned in any medieval sources except as being covered by farmland, but the 18th century saw the beginning of urban concentration. The Danish rulers of Iceland backed the idea of domestic industry in Iceland that would stimulate much-needed development on the island. In 1752, the King of Denmark, Frederik V, donated the estate of Reykjavík to the
Innréttingar Corporation; the name comes from the Danish language word indretninger, meaning institution. The leader of this movement was
Skúli Magnússon . In the 1750s several houses were built to house the wool industry that was to be Reykjavík's most important employer for a few decades and the original reason for its existence. Other crafts were also practised by the Innréttingar, such as fisheries, sulphur mining, agriculture, and shipbuilding.
The Danish Crown abolished monopoly trading in 1786 and granted six communities around the country an exclusive trading charter. Reykjavík was one of them and the only one to hold on to the charter permanently. The year 1786 is regarded as the date of the city's founding; its 200th anniversary was celebrated in 1986. Trading rights were still limited to the subjects of the Danish Crown, and Danish traders continued to dominate trade in Iceland. Over the following decades, their business in Iceland expanded. After 1880, free trade was expanded to all nationalities and the influence of Icelandic merchants started to grow.
Rise of nationalism
Icelandic nationalist sentiment gained influence in the 19th century and the idea of Icelandic independence became widespread. Reykjavík, as Iceland's only city, was central to such ideas. Advocates of an independent Iceland realized that a strong Reykjavík was fundamental to that objective. All the important events in the history of the independence struggle were important to Reykjavík as well. In 1845 Alþingi, the general assembly formed in 930 AD, was re-established in Reykjavík; it had been suspended a few decades earlier when it was located at Þingvellir. At the time it functioned only as an advisory assembly, advising the King about Icelandic affairs. The location of Alþingi in Reykjavík effectively established the city as the capital of Iceland.
In 1874, Iceland was given a constitution; with it, Alþingi gained some limited legislative powers and in essence became the institution that it is today. The next step was to move most of the executive power to Iceland: Home Rule was granted in 1904 when the office of Minister For Iceland was established in Reykjavík. The biggest step towards an independent Iceland was taken on 1 December 1918 when Iceland became a sovereign country under the Crown of Denmark, the Kingdom of Iceland.
By the 1920s and 1930s most of the growing Icelandic fishing trawler fleet sailed from Reykjavík and salt-cod production was its main industry, but the Great Depression hit Reykjavík hard with unemployment and labour union struggles occurring that sometimes became violent.
World War II
On the morning of 10 May 1940, following the German occupation of Denmark and Norway on 9 April 1940, four British warships approached Reykjavík and anchored in the harbour. In a few hours, the allied occupation of Reykjavík was complete. There was no armed resistance, and taxi and truck drivers even assisted the invasion force, which initially had no motor vehicles. The Icelandic government had received many requests from the British government to consent to the occupation, but it always declined on the basis of the Neutrality Policy. For the remaining years of World War II, British and later American soldiers occupied camps in Reykjavík, and the number of foreign soldiers in Reykjavík became about the same as the local population of the city. The Royal Regiment of Canada (RREGTC) formed part of the garrison in Iceland during the early part of the war.
The economic effects of the occupation were positive for Reykjavík: the unemployment of the Depression years vanished and construction work began. The British built Reykjavík Airport, which is still in service today, mostly serving domestic flights. The Americans, meanwhile, built Keflavík Airport, situated 50 km (31 mi) west of Reykjavík, which would become Iceland's primary international airport. In 1944, the Republic of Iceland was founded and a president, elected by the people, replaced the King; the office of the president was placed in Reykjavík.
In the post-war years the growth of Reykjavík accelerated. An exodus from the rural countryside began, largely due to improved technology in agriculture that reduced the need for manpower, and because of a population boom resulting from better living conditions in the country. A once primitive village was rapidly transformed into a modern city. Private cars became common and modern apartment complexes rose in the expanding suburbs. Much of Reykjavík lost its village feel. In 1972, Reykjavík hosted the world chess championship between Bobby Fischer and Boris Spassky. The 1986 Reykjavík Summit between Ronald Reagan and Mikhail Gorbachev underlined Reykjavík's international status. Deregulation in the financial sector and the computer revolution of the 1990s again transformed Reykjavík. The financial and IT sectors are now significant employers in the city. The city has fostered some world-famous talents in recent decades, such as Björk, Ólafur Arnalds and bands Múm, Sigur Rós and Of Monsters and Men, poet Sjón and visual artist Ragnar Kjartansson.