Reykjavik is more than just Iceland’s capital, but the center of Iceland’s culture, history, and economy.

For such a relatively small city, Reykjavik packs a punch, whether you are looking for a cozy coffee shop in the morning, jam-packed museum day, or a fun night out.

Moreover, Reykjavik is easily explored by foot, as well as home to an efficient public bus system that links the city to the surrounding suburbs, so you can get around with ease.

Choosing where to stay in Reykjavik can prove tricky, however, if you are on a budget or hoping to save money on accommodation to indulge in Reykjavik’s other activities.

Our neighborhood guide for the best areas to stay in Reykjavik will help you choose where you should stay, whether you want to be walking distance of the best museums, nightlife, or situated in the best area to stay in Reykjavik to explore nearby nature.

Where to Stay in Reykjavik

Looking for a specific place to stay? These are our highest recommendations for the best places to stay in Reykjavik. Make sure to check out our hostel guide on Reykjavik too!

Best Airbnb in Reykjavik: Beautiful Reykjavik Studio

Beautiful Reykjavik Studio

Not often do you find spacious, modern studio apartments for such an affordable price in Iceland. Sure, it’s definitely not the cheapest, however, if you use the Airbnb’s full capacity of 4 guests and split the bill at the end, it’ll turn out cheaper than a hostel. The space is super modern, bright and sparkling clean. There’s a comfy living area with a massive TV, perfect for a lazy day indoors. The location couldn’t be better either, you’ll be based on the main street of the absolute centre of Reykjavik.

Best Hostel in City: Galaxy Pod Hostel

Galaxy Pod Hostel

Thanks to its great location in Hlidar, Galaxy Pod Hostel is our top pick for the best place to stay in Reykjavik. A short walk to downtown, this hostel is close to restaurants, bars, and the city’s top museums. It has a movie room, a bar and social lounge, and a self-service kitchen.

Best Hotel in City: Heida’s Home Center

Heidas Home Center

This modern guesthouse is located at the centre of the city, conveniently situated for exploring Reykjavik. It has 12 cosy rooms, each outfitted with wifi, heating and a variety of amenities.

Close to Reykjavik’s entertainment district, Heida’s Home Centre is a short walk to restaurants, bars and clubs.

Reykjavik Neighborhood Guide

FIRST TIME IN REYKJAVIK
Midborg, Reykjavik
FIRST TIME IN REYKJAVIK

Midborg

Midborg is the heart, soul and centre of Reykjavik. It is the small and compact downtown area where you’ll find many of the best shops, restaurants, bars and attractions. It’s hands down the best place to stay in Reykjavic for first-time visitors.

ON A BUDGET
Hlidar, Reykjavik
ON A BUDGET

Hlidar

Relatively quiet, this residential neighbourhood is popular amongst students and young people. It is also here that you’ll find the highest concentration of backpacker hostels and budget hotels.

NIGHTLIFE
Midborg, Reykjavik
NIGHTLIFE

Midborg

Midborg isn’t just the best neighbourhood for first-time visitors, but it’s also Reykjavik’s dedicated entertainment zone. Sprinkled throughout the city’s colourful street you’ll find the best places to stay in Reykjavic to let your hair down, grab a drink and enjoy a night on the town.

COOLEST PLACE TO STAY
Vesturbaer, Reykjavik
COOLEST PLACE TO STAY

Vesturbær

Vesturbær is an up-and-coming neighbourhood is this northern capital of cool. It is centrally located making it easy to explore the city, but far enough away to maintain its own relaxed and sophisticated vibe.

FOR FAMILIES
Laugardalur, Reykjavik
FOR FAMILIES

Laugardalur

There’s no better place to stay for families than Laugardalur neighbourhood. Centrally located, this neighbourhood is quiet and residential but well connected to the city.

Reykjavik is the capital and largest city in Iceland. Home to approximately 200,000 people, it is Iceland’s cultural, historic, economic and commercial centre.

The smallest capital in Europe, Reykjavik is a compact city that can be easily explored on foot. It is also incredibly safe, so visitors should feel perfectly comfortable exploring its colourful streets day and night.

It is divided into 10 unique neighbourhoods and this guide will break down the top activities and attractions by interest.

Midborg, or 101 as it’s affectionately referred to by locals, is the heart, soul and centre of Reykjavik. Home to many of the city’s top attractions, Midborg is where you’ll find lively bars, independent shops and a great number of quirky and interesting museums. Our top pick places to stay in Reykjavik for first-time visitors, Midborg is also where to stay in Reykjavik for the best nightlife.

To the west of the centre is Vesturbær. This up-and-coming district is a great combination of city centre convenience and residential quiet. It’s where you’ll find chic boutique and local designers, as well as cute cafes and charming museums.

Travelling east you’ll pass through the neighbourhoods of Hlidar, Haaleitis, Laugardalur and Arbær. Typically residential areas, these neighbourhoods are home to parks and playgrounds and are perfect for travellers keen on outdoor adventures not too far from the city.

Still not sure where to stay in Reykjavik? Don’t worry, we’ve got you covered below!

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5 Best Neighborhoods to Stay in Reykjavik

The centre of Reykjavik covers less than 4 square kilometres and is best explored on foot. There is a very efficient public bus system that links the city centre with the surrounding suburbs, so no matter where you stay you’ll be able to explore the Reykjavik with relative ease.

That said, some areas of Reykjavik are better suited than others to specific interests. Do you want to be at the centre of the action? Maybe you want a quieter place for your visit? Perhaps one of these bed and breakfasts in Reykjavik are better suited for you?

Perhaps you want to stay within walking distance of the coolest museums and independent shops. All of these things are possible if you are in the right place.

Here are the best neighbourhoods in Reykjavik broken down by interest.

1. Midborg Neighborhood – Where to Stay in Reykjavik for First Time Visitors

Midborg, Reykjavik

Midborg is the heart, soul and centre of Reykjavik. It is the small and compact downtown area where you’ll find many of the best shops, restaurants, bars and attractions. If you’re looking to stay right at the centre of the action, this is the neighbourhood for you. There are some great Reykjavik Airbnbs around here as well.

Midborg is our top recommendation for where to stay in Reykjavik for the first time. Enjoy top landmarks, like the towering Hallgrimskirkja, great restaurants and historical and cultural attractions all just steps from your front door.

Best Airbnb in Midborg: Beautiful Reykjavik Studio

Beautiful Reykjavik Studio

Not often do you find spacious, modern studio apartments for such an affordable price in Iceland. Sure, it’s definitely not the cheapest, however, if you use the Airbnb’s full capacity of 4 guests and split the bill at the end, it’ll turn out cheaper than a hostel. The space is super modern, bright and sparkling clean. There’s a comfy living area with a massive TV, perfect for a lazy day indoors. The location couldn’t be better either, you’ll be based on the main street of the absolute centre of Reykjavik.

Best Hostel in Midborg: Reykjavik – Loft HI Hostel

Reykjavik Loft HI Hostel

Thanks to its location in the heart of downtown, Loft HI Hostel is our top pick for where to stay in Midborg. It has a full kitchen, comfortable rooms, and a spacious lounge with a book exchange, board games, and delicious coffee station.

Just steps from downtown, it is surrounded by restaurants, bars, shops and attractions.

Best Hotel in Midborg: Hotel Fron

Hotel Fron

Hotel Fron is a charming three-star hotel in Midborg. Its modern rooms feature flat-screen TVs, private bathrooms and free wifi. The hotel also has its own restaurant where guests can enjoy delicious meals throughout the day.

Close to bars, restaurants, monuments and more, this is one of our top picks for Midborg.

Best Hotel in Midborg: Hotel Ódinsvé

Hotel Odinsve

This central Reykjavik hotel is stylish and modern. Located at the heart of the city, it’s close to bars, restaurants, shops and museums. It has wireless internet, a little terrace on the second floor with a nice city view, and an on-site cafe. Each room comes with a private coffee machine, perfect to start the day right before heading out to explore the city.

Things to see and do in Midborg

  • See the spectacular Hallgrimskirkja church that towers above the city. Climb to the top for an unbeatable view of colourful and quaint Reykjavik.
  • Visit the Perlan (the Pearl), a former hot water storage tank that is now home to a world-class restaurant, cafeteria, and a great view.
  • Explore the displays and exhibits at the National Museum of Iceland.
  • Jump back in time to the Viking Age at the Settlement Exhibition.
  • Learn about volcanoes, lava, magma and more at The Volcano House.
  • Catch a performance at the architecturally beautiful Harpa Reykjavik Concert Hall and Conference Centre.
  • See the Sun Voyager, a stainless steel sculpture that glistens beside the sea.
  • Snap a picture of the interesting and quirky Monument to the Unknown Bureaucrat.
  • Wander amongst the statues at Einar Jónsson Outdoor Sculpture Garden.
  • Take a swim at Nauthólsvík, a geothermal beach where the ocean water is warm and comfortable for swimming.

2. Hlidar Neighborhood – Where to Stay in Reykjavik on a Budget

Hlidar, Reykjavik

Hlidar is a neighbourhood in central Reykjavik, a short walk from the east side of downtown. The Icelandic Phallological Museum, Skal!, and the Reykjavik Museum of Art are just a few of the attractions that make this one of the top neighbourhoods in Reykjavik.

Relatively quiet, this residential neighbourhood is popular amongst students and young people. It is also here that you’ll find the highest concentration of Reykjavik’s backpacker hostels and budget hotels.

While the term “budget” is relative in Reykjavik, this is the best area to stay if you are trying to conserve your money. Enjoy all the perks of downtown Reykjavik without the high prices.

Best Airbnb in Hlidar: Affordable Private Room

Affordable Private Room

You won’t find another Airbnb in Iceland that’s as cheap as this one. You get a super comfy room to yourself. You’ll be living in the house of a local family, and all common areas are shared – so make sure to be respectful. You’ll be located around 20m from the heart of the city, meaning that there’s a lot to explore during the day. If you don’t know where to start, you can ask your host family for recommendations or advice on what to see first.

Best Hostel in Hlidar: Galaxy Pod Hostel

Galaxy Pod Hostel

Thanks to its great location, Galaxy Pod Hostel is our top pick for where to stay in Reykjavik on a budget. A short walk to downtown, this hostel is close to restaurants, bars and the city’s top museums. It has a movie room, bar and social lounge, and a self-service kitchen for guests to use.

Best Guesthouse in Hlidar: Alba Guesthouse

Alba Guesthouse

Alba Guesthouse is a comfortable and basic home – and one of our top picks for where to stay in Hlidar. Super comfy beds, clean showers and a great location are just some of the features we like about this guesthouse.

Within walking distance of downtown, this place is close the Art Gallery, restaurants, and many of Reykjavik’s top attractions.

Best Hotel in Hlidar: Bus Hostel Reykjavik

Bus Hostel Reykjavik

This charming three-star property is one of our top recommendations for where to stay in Reykjavik. It’s close to shops, restaurants, and Reykjavik’s best nightlife.

The staff is friendly and knowledgeable, and there’s even a tour agency on-site to help you make the most of your time in this awesome country.

Things to see and do in Hlidar

  • Visit the Icelandic Philological Museum, the world’s only museum dedicated to penises and penile parts.
  • See a large selection of contemporary Icelandic art at Galleri List, the oldest fine art gallery in the country.
  • Enjoy delicious European and Scandinavian dishes at Skal!.
  • Explore the largest visual art collection in Iceland at the Reykjavík Art Museum.
  • Catch a Valur football match at Valsvöllur.
  • Shop til you drop at Kringlan, a nearby shopping mall.
  • Savour the great flavours at Mai Thai, a cheap and delicious Thai restaurant.
  • Sit back, relax and watch a film at the state of the art cinema, Sambíóin Kringlunni.
  • Climb Oskjuhilo and enjoy stunning views from the top of the hill.
  • Head out late at night in the winter months and see the spectacular Northern Lights.
  • Grab a sweet treat at Don’s Donuts.

3. Midborg Neighborhood – Where to Stay in Reykjavik for Bars and Nightlife

Midborg, Reykjavik

Midborg isn’t just the best neighbourhood for first-time visitors, but it’s also Reykjavik’s dedicated entertainment zone. Sprinkled throughout the city’s colourful street you’ll find the best place to stay in Reykjavic to let your hair down, grab a drink and enjoy a night on the town.

Whether you’re looking for a cosy pub, lively bar, or vibrant club, there’s something in Midborg all tastes and styles.

Need more inspiration for what to do in Reykjavik after dark? Midborg is also where you’ll find a great variety of restaurants. From world-class restaurants to popular hot dog stands, this neighbourhood has it all, and more.

Best Airbnb in Midborg: Perfectly located apartment

Perfectly located apartment

Recline on a chaise sofa with a book in this stylish Scandinavian style living room. Muted pastel green and subway tile backsplash are combined within a cozy kitchen while enchanting artwork adorns the walls of an understated dining area.

The apartment is located right behind Hallgrimskirkja Church, and about a 5-minute walk from the main bus terminal. Steps away you’ll find the best restaurants, bars, and shops downtown Reykjavik has to offer.

Best Hostel in Midborg: KEX Hostel

KEX Hostel

KEX Hostel is where the party’s at – which is why it’s our top choice for best places to stay in Midborg for nightlife. It’s located at the heart of the entertainment district and is just steps from the hottest bars, trendiest clubs, and most delicious restaurants.

It has an on-site bar and lounge, heated patio, and a common room for guest to enjoy.

Best Hotel in Midborg: Fosshotel Baron

Fosshotel Baron

Fosshotel Baron is a modern, three-star hotel in downtown Reykjavik. It’s close to great shopping, delicious restaurants, and fun and lively bars. Each room is tastefully decorated and comes with a private shower, flat-screen TV, and comfortable beds.

Guest can enjoy unwinding after a day in the city or a night on the town at the on-site restaurant or stylish lounge bar.

Best Hotel in Midborg: Heida’s Home Center

Heidas Home Center

This modern guesthouse is located at the centre of the city, conveniently situated for exploring Reykjavik. It has 12 cosy rooms, each outfitted with wifi, heating and a variety of amenities. Close to Reykjavik’s entertainment district, Heida’s Home Centre is a short walk to restaurants, bars and clubs.

Things to see and do in Midborg

  • Taste delicious and traditional Icelandic dishes at Old Iceland.
  • Sample more than 170 whiskeys at Dillion Whiskey Bar.
  • Try great craft beer from around the world at Skuli Craft Bar.
  • Eat great food and enjoy a fun atmosphere at Boston.
  • Dance the night away or catch a drag show at Kiki Queer Bar.
  • Drink white Russians and pay homage to the Dude at the Lebowski Bar.
  • Sample a variety of small plates at trendy and quirky Bar Ananas.
  • Spend a night at the infamous Kaffibarinn, a hip bar with a bohemian vibe.
  • Try a local favourite, Brio beer, at Olstofa Kormaks og Skjaldar, a charming and cosy bar.
  • Rock out at Bar 11.
  • Enjoy good drinks and great vibes at Hurra.
  • Dance from dusk until dawn at Pablo Discobar.
  • End your night by digging into a hot dog, Iceland’s unofficial national dish.

4. Vesturbær Neighborhood – Coolest Place to Stay in Reykjavik

Vesturbaer, Reykjavik

Vesturbær is an up-and-coming neighbourhood is this northern capital of cool. It is centrally located making it easy to explore the city, but far enough away to maintain its own relaxed and sophisticated vibe.

Located near the old harbour, Vesterbær is where you’ll find independent boutiques, chic cafes, and hip bars and breweries. It’s a foodie paradise, thanks to a good number of delicious and innovative restaurants serving up everything from traditional and fusion fare to cheeky hot dogs and tasty tapas.

Best Airbnb in Vesturbær: Cute flat close to shore

Cute flat close to shore

This apartment is located in the coolest area of Reykjavík, Vesturbær. A walk to downtown is just about 15 minutes, and there’s a wonderful walking path on the shoreline if you want to chill and unwind. They offer free WiFi, Apple TV and Netflix. Also: a swimming-pool, coffee-house, restaurants, bakery, gourmet food-stores and friendly neighbors!

Best Hotel in Vesturbær: Radisson Blu Saga Hotel Reykjavik

Radisson Blu Saga Hotel Reykjavik

The Radisson Blue is a great hotel in the Vesturbær neighbourhood. It boasts a comfortable lounge, on-site restaurants and panoramic city views.

Each room has air conditioning, a relaxing bathroom, and movies-on-demand. Enjoy a great stay in Reykjavik at this four-star hotel.

Best Hotel in Vesturbær: Reykjavik 107

Reykjavik 107

Reykjavik 107 is a cute little place in the heart of the neighborhood. It’s not the most modern one, but still incredibly charming and homely. The guesthouse offers cute and spacious rooms with a shared bathroom. It’s a perfect place for a solo traveller or a couple that wants to keep the expenses low. If you’re travelling with a car, you’ll be pleased to know that the place offers free parking spots as well!

Things to see and do in Vesturbær

  • Sample a variety of local beers at Ægisgarður, home of Viking brewery.
  • See contemporary works of art by Icelandic and international artists at The Living Art Museum.
  • Dine on unique dishes at XO, a delightfully upscale fast food joint.
  • View life-size models and interactive exhibits at the Whales of Iceland.
  • Dive deep into Icelandic history at the Saga Museum.
  • Grab a treat and take a tour of the Omnom chocolate factory.
  • Can’t catch the northern lights on your visit? Learn all about this stunning natural phenomenon at the Aurora Reykjavik Museum.
  • Go for a swim at the Vesturbaejarlaug public swimming pool.
  • Enjoy a cup of great coffee and a sweet treat at Joi Fel.
  • Savour authentic Italian food at Flatey Pizza.
  • Shop at the designs of one to Iceland’s top designers at STEiNUNN, a chic local boutique.

5. Laugardalur – Where to Stay in Reykjavik for Families and Outdoor Adventures

Laugardalur, Reykjavik

There’s no better place to stay for families than Laugardalur neighbourhood. Centrally located, this neighbourhood is quiet and residential but well connected to the city. Whether you choose to walk or hop on the bus, you’ll find yourself at the heart of Reykjavik in 30 minutes or less.

Laugardalur is also a draw to travellers who enjoy outdoor adventures. It’s packed with activities that are perfect for the whole family from zoos and water parks to archaeological sites and museums. There’s something for kids and adults of all ages in this charming Icelandic neighbourhood.

Best Airbnb in Laugardalur: Stunning family home

Stunning family home

This incredible Airbnb is a true hidden gem on the island! Accommodating 5 people at a time, it’s ideal for bigger families or a group of friends. It’s listed as an apartment, however, it’s a two story home. Super modern and bright, you’ll feel welcome as soon as you step through the door. The big windows offer a stunning view of Mountain Esja. There are cool books about Iceland free to read for guests, as well as a Smart TV with free Netflix. The big living room is the perfect spot for the family to come together after a long day of exploring Reykjavik and enjoy the last couple of hours before the day ends.

Best Hostel in Laugardalur: Reykjavik City HI Hostel

Reykjavik City HI Hostel

Reykjavik City HI Hostel is a great hostel located at the heart of Langardalur. It is close to swimming pools, parks, and is just a 30-minute walk into Midborg. It has laundry facilities, a full kitchen, and an outdoor patio. Guests can enjoy comfortable beds, free wifi and daily breakfast throughout their stay.

Best Hotel in Laugardalur: Arctic Comfort Hotel

Arctic Comfort Hotel

Arctic Comfort Hotel is a delightful three-star hotel in Laugardalur. It is close to cafes, restaurants and shops. Guests can unwind after a day of sightseeing in the lounge bar. Each room is spacious, tastefully decorated, and comes with all the necessary amenities for a wonderful stay.

Best Hotel in Laugardalur: Hotel Island

Hotel Island

Thanks to its comfortable rooms and modern décor, Hotel Island is our top pick for where to stay in Laugardalur. This charming three-star hotel has a laundry service, on-site restaurant and a cosy lounge for relaxing in. Each room comes with cable/satellite TV, a refrigerator and complimentary wifi.

Things to see and do in Laugardalur

  • Go for a swim at the Laugardalslaug, the city’s largest public swimming facility that includes two waterslides, steam baths, and thermal pools.
  • See your favourite Icelandic animals and sea mammals at Husdyragardurinn, a cute little zoo.
  • See the curious, interesting and often bizarre works of art at the Asmundur Sveinsson Sculpture Museum.
  • Stop and smell the roses at Grasagardur Reykjavik botanical garden.
  • Catch a football match at Laugardalsvollur stadium.
  • Hop aboard the ferry and explore the archaeological site on the nearby island of Videy.
  • Learn all about Elves, the Hidden People, and Icelandic folklore at the Icelandic Elf School.
  • Spend a day at Fjölskyldugarðurinn, a family oriented park with rides, playgrounds, disc golf and lots of fun for the whole family.
  • Zip around the track at Go-Kart Hollin.
  • Rent bikes and cruise along the paved shore walk that runs from Videy ferry terminal to Reykjavik and beyond!

Final Thoughts for Where to Stay in Reykjavik

Reykjavik is more than just the gateway to Iceland’s natural wonders. The capital itself offers tourists and locals plenty of awesome and unique activities, like quirky museums, art galleries, trendy breweries, shops, and bars, and more!

It’s a small city that can be navigated on foot, but you will want to base yourself near your interests, so you can be walking distance from your choice of activities. Reykjavik isn’t cheap, after-all.

That said, if you’re still not sure where to stay in Reykjavik, I highly recommend Galaxy Pod Hostel for backpackers and solo travelers. Heida’s Home Center is the perfect cosy guesthouse for those looking for more privacy.

Did we miss anything? Let us know in the comments!

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Getting an estimate from World Nomads is simple – just click the button or image below, fill out the necessary info, and you’re on your way!

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