GDP/capita sits at a cool $55,000, HDI is bumping the upper bounds at 0.959, and the Happiness Index rates it as one of the most content countries on earth (as of April 2023).

Iceland is pretty chilled.

Welcome to a country where owning a lizard is illegal, and you’re more likely to get mugged by your best mate than anyone else…

And with my EPIC guide to where to stay in Reykjavik, you should have no trouble sourcing a saucy pad, chasing down a cold beverage, and having a fantastic stay in the Icelandic capital.

Let’s see what’s out there!

Scenery view of Reykjavik
Welcome to Iceland’s enigmatic (and chilly) capital!

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Where to Stay in Reykjavik

Are you backpacking Iceland like the cold doesn’t affect you? Do you need a quick recommendation to bring you in from the harsh and unforgiving outdoors?

Whether you’re searching for sexy luxury hotels, lively hostels, or a homestay that would make a celebrity tweet something useless, these are my top picks in Reykjavik.

Beautiful Reykjavik Studio | Best Airbnb in Reykjavik

Beautiful Reykjavik Studio

There is a general sense of muted style and class in the Icelandic capital, and this gorgeous place to stay is no exception to this rule! Combining clean colours and decor with modern furnishings, there is a great comfy atmosphere. The best feature, however, is the location! Dropped right in the middle of the city centre, this Airbnb will unlock all of the city’s attractions. And the price tag ain’t too bad either…

Loft HI Hostel | Best Hostel in Reykjavik

Loft HI Hostel

If you adore Gen-Z-sounding words like ‘Scandi-chic’ and ‘eco-credentials’, then you are going to love Loft HI. And even if you don’t, it is one of the most consistent and comfortable hostels in the city! There is a cosy common room, a host of board games, a book exchange, and even a four-hour happy hour every day (4-8 pm). This is for sure one of the best hostels in Reykjavik. The on-site bar and cafe are equipped with pretty lethal free Wi-Fi too, so don’t worry about that next vlog update!

The Reykjavik EDITION | Best Hotel in Reykjavik

The Reykjavik EDITION

If you’re looking to sit comfortably, then you’ll have a very pleasant time at the Reykjavik Edition. Set on the waterfront, and not too far from the city centre, this luxury hotel is ridiculously clean, convenient, and straightforward. Offering 5-star accommodation to guests, it has an on-site fitness centre, a heated pool and a sauna. The apex of the Reykjavik hotel food chain.

Reykjavik Neighborhood Guide – Places to Stay in Reykjavik

Midborg, Reykjavik

Downtown Reykjavik

Downtown Reykjavik 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.

Hlidar, 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 backpacker hostels and budget hotels.

Midborg, Reykjavik

Downtown Reykjavik

Downtown Reykjavik 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.

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.

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.

Reykjavik is the capital and largest city in Iceland. Home to approximately 60% of Iceland’s entire population, you’ll be staying here no matter what time you visit Iceland.

As 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.

Downtown Reykjavik, 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, Downtown Reykjavik is where you’ll find lively bars, independent shops and a great number of quirky and interesting museums.

Geyser explodes in Reykjavik's wild outdoors.

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 boutiques and local designers, as well as cute cafes and charming museums.

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

It’s worth noting that most places to stay in Reykjavik will have some connection with the awesome Blue Lagoon. Don’t stress about missing it!

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 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 a steamy bed and breakfast is better suited for you?

No matter what you’re searching for, the best neighborhoods in Reykjavik will surely serve you something special!

1. Downtown Reykjavik – Where to Stay in Reykjavik for First-Time Visitors

Downtown Reykjavik 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 neighborhood for you. There are some great Reykjavik Airbnbs around here as well.

Midborg, Reykjavik
The Hallgrímskirkja is a pretty wild Lutheran monument

Downtown Reykjavik 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.

Beautiful Reykjavik Studio | Best Airbnb in Downtown Reykjavik

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 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.

Loft HI Hostel | Best Hostel in Downtown Reykjavik

Loft HI Hostel

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

Slap in the city centre, it is surrounded by restaurants, bars, shops and attractions. There is a fantastic social atmosphere, and a suspiciously long happy hour…

Hotel Fron | Best Hotel in Downtown Reykjavik

Hotel Fron

Hotel Fron is a charming three-star hotel in Downtown Reykjavik. 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 Downtown Reykjavik.

Hotel Ódinsvé | Best Hotel in Downtown Reykjavik

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 Downtown Reykjavik

  1. See the spectacular Hallgrimskirkja church that towers above the city. Climb to the top for an unbeatable view of colourful and quaint Reykjavik.
  2. Join an exclusive whale-watching experience on a spectacular yacht!
  3. 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.
  4. Explore the displays and exhibits at the National Museum of Iceland.
  5. Jump back in time to the Viking Age at the Settlement Exhibition.
  6. Learn about volcanoes, lava, magma and more at The Volcano House.
  7. Catch a performance at the architecturally beautiful Harpa Reykjavik Concert Hall and Conference Centre.
  8. Head out into the wilderness on a snowmobile tour! There is no cooler way to get around…
  9. See the Sun Voyager, a stainless steel sculpture that glistens beside the sea.
  10. Snap a picture of the interesting and quirky Monument to the Unknown Bureaucrat.
  11. Wander amongst the statues at Einar Jónsson Outdoor Sculpture Garden.
  12. Take a swim at Nauthólsvík, a geothermal beach where the ocean water is warm and comfortable for swimming.
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2. Hlidar Neighborhood – Where to Stay in Reykjavik on a Budget

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 neighborhoods in Reykjavik.

Hlidar, Reykjavik
Check out those lights!

Relatively quiet, this residential neighborhood 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.

Affordable Private Room | Best Airbnb in Hlidar

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.

Bus Hostel Reykjavik | Best Hostel in Hlidar

Bus Hostel Reykjavik

Is that a recent renovation? Yes! The bus hostel Reykjavik has returned to compete with the top local hostels, and is now a formidable opponent. Equipped with a bar and lounge, happy hour runs from 5 until 9 pm every day, and there are a number of tours you can organise straight out of the hostel, including to the Blue Lagoon. Located within a medium walking distance of the Laugavegur shopping street and Reykjavik Art Museum, this hostel can just about claim a central location.

Alba Guesthouse | Best Guesthouse in Hlidar

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.

Things to see and do in Hlidar

  1. Visit the Icelandic Philological Museum, the world’s only museum dedicated to penises and penile parts.
  2. See a large selection of contemporary Icelandic art at Galleri List, the oldest fine art gallery in the country.
  3. Grab a city pass and enjoy unfettered access to the main city attractions!
  4. Enjoy delicious European and Scandinavian dishes at Skal!.
  5. Explore the largest visual art collection in Iceland at the Reykjavík Art Museum.
  6. Catch a Valur football match at Valsvöllur.
  7. Shop til you drop at Kringlan, a nearby shopping mall.
  8. Savour the great flavours at Mai Thai, a cheap and delicious Thai restaurant.
  9. Head out into the Icelandic wilderness on quadbikes for some truly epic geology.
  10. Sit back, relax and watch a film at the state-of-the-art cinema, Sambíóin Kringlunni.
  11. Climb Oskjuhilo and enjoy stunning views from the top of the hill.
  12. Head out late at night in the winter months and see the spectacular Northern Lights.
  13. Grab a sweet treat at Don’s Donuts.

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

Downtown Reykjavik isn’t just the best neighborhood 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.

Midborg, Reykjavik

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

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

Downtown Studio | Best Airbnb in Downtown Reykjavik

Downtown Studio

Are you yearning for Reykjavik’s city centre life? Then try this brilliant Airbnb! Just a minute’s walk from the Laugavegur shopping Street, this stay offers brilliant access to downtown Reykjavik. With modern furnishings and a great location near all of the major attractions, you won’t be disappointed by a booking here. It’s clean, comfortable, warm, and inexpensive. What more could you ask for?

Don’t go there.

KEX Hostel | Best Hostel in Downtown Reykjavik

KEX Hostel

KEX Hostel is where the party’s at – which is why it’s our top choice for best places to stay in Downtown Reykjavik 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.

Fosshotel Baron | Best Hotel in Downtown Reykjavik

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.

Tower Suites Reykjavik | Best Hotel in Downtown Reykjavik

Tower Suites Reykjavik

If you want to supercharge the style and glamour of your Icelandic foray, I would recommend a room at the Tower Suites Reykjavik. Located on the 20th floor of a contemporary glass building, every room offers extraordinary views, a complimentary mini-bar, and a Nespresso coffee maker. Of course. There are a number of restaurants and shops on the ground floor. Breakfast is made to order, and often comes far too large for just two people! This is definitely one of the best hotels in Reykjavik.

Things to see and do in Downtown Reykjavik

  1. Taste delicious and traditional Icelandic dishes at Old Iceland.
  2. Sample more than 170 whiskeys at Dillion Whiskey Bar.
  3. Try great craft beer from around the world at Skuli Craft Bar.
  4. Eat great food and enjoy a fun atmosphere at Boston.
  5. Send it out of town on a south shore adventure. You know you wanna!
  6. Dance the night away or catch a drag show at Kiki Queer Bar.
  7. Drink white Russians and pay homage to the Dude at the Lebowski Bar.
  8. Sample a variety of small plates at trendy and quirky Bar Ananas.
  9. Spend a night at the infamous Kaffibarinn, a hip bar with a bohemian vibe.
  10. Try a local favourite, Brio beer, at Olstofa Kormaks og Skjaldar, a charming and cosy bar.
  11. Rock out at Bar 11.
  12. Explore the city on a VIP walking tour.
  13. Enjoy good drinks and great vibes at Hurra.
  14. Dance from dusk until dawn at Pablo Discobar.
  15. End your night by digging into a hot dog, Iceland’s unofficial national dish.
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4. Vesturbær Neighborhood – Coolest Place to Stay in Reykjavik

Vesturbær is an up-and-coming neighborhood in 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.

Vesturbaer, Reykjavik

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.

Cute flat close to shore | Best Airbnb in Vesturbær

Cute flat close to shore

This apartment is located in the coolest area of Reykjavík, Vesturbær. A walk downtown is about 15 minutes, and there’s a wonderful sightseeing 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!

Student Hostel | Best Hostel in Vesturbær

Student Hostel

This hostel is a little closer to the Reykjavik city centre than the rest of Vesturbær, which makes it a great place to stay! Set on the University of Iceland’s student campus, there are a variety of restaurants to be found nearby and top-tier nightlife! 30 new modern rooms have been added, with private bathrooms and a fully equipped kitchen on each floor. If you want to make those pennies last, this hostel is a great choice!

The Exeter Hotel | Best Hotel in Vesturbær

The Exeter Hotel

Really, this should read best hotel outside of Vesturbær, but we move. The Exeter Hotel is located on the northern coast, and is therefore in a prime location next to the city centre! Boasting a contemporary design, spacious rooms and a sensational breakfast, this luxury hotel is one of the best in Reykjavik. It has a great central location too, close to all of the top attractions!

Things to see and do in Vesturbær

  1. Sample a variety of local beers at Ægisgarður, home of Viking brewery.
  2. See contemporary works of art by Icelandic and international artists at The Living Art Museum.
  3. Dine on unique dishes at XO, a delightfully upscale fast food joint.
  4. View life-size models and interactive exhibits at the Whales of Iceland.
  5. Dive deep into Icelandic history at the Saga Museum.
  6. Head into town and enjoy a beer and booze tour.
  7. Grab a treat and take a tour of the Omnom chocolate factory.
  8. Can’t catch the northern lights on your visit? Learn all about this stunning natural phenomenon at the Aurora Reykjavik Museum.
  9. Go for a swim at the Vesturbaejarlaug public swimming pool.
  10. Enjoy a cup of great coffee and a sweet treat at Joi Fel.
  11. Savour authentic Italian food at Flatey Pizza.
  12. 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

There’s no better place to stay for families than Laugardalur neighborhood. Centrally located, this neighborhood 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, Reykjavik

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 neighborhood.

Bright and Cozy Apartment | Best Airbnb in Laugardalur

Bright and Cozy Apartment

If you’re searching for something family-friendly, then this stunning apartment (home?) is perfect for you! With free parking, access to a gorgeous shared garden, and a top location not too far from the city centre, this Airbnb has it all. This is the perfect place to stay in Reykjavik with kids, as it has a master bedroom and a twin room. There is free wifi and a great kitchen, and you can walk to the supermarket, cafes, etc.

Sky Lagoon is just a 10-minute walk away.

Reykjavik City HI Hostel | Best Hostel in Laugardalur

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.

Hotel Island | Best Hotel in Laugardalur

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.

Arctic Comfort Hotel | Best Hotel in Laugardalur

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.

Things to see and do in Laugardalur

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

Here’s what people usually ask us about the areas of Reykjavik and where to stay.

What To Pack For Reykjavik

Pants, socks, underwear, soap?! Take it from me, packing for a hostel stay is not always quite as straightforward as it seems. Working out what to bring and what to leave at home is an art I have perfected over many years.

Don’t Let Snorers Keep You Awake!
Don’t Let Snorers Keep You Awake!

Ear Plugs

Snoring dorm-mates can ruin your nights rest and seriously damage the hostel experience. This is why I always travel with a pack of decent ear plugs.

Keep your laundry organized and stink free
Keep your laundry organized and stink free

Hanging Laundry Bag

Trust us, this is an absolute game changer. Super compact, a hanging mesh laundry bag stops your dirty clothes from stinking, you don’t know how much you need one of these… so just get it, thank us later.

Stay Dry With a Micro Towel
Stay Dry With a Micro Towel

Sea To Summit Micro Towel

Hostel towels are scummy and take forever to dry. Microfibre towels dry quickly, are compact, lightweight, and can be used as a blanket or yoga mat if need be.

Make Some New Buddies…
Make Some New Buddies…

Monopoly Deal

Forget about Poker! Monopoly Deal is the single best travel card game that we have ever played. Works with 2-5 players and guarantees happy days.

Reduce Plastic – Bring a Water Bottle!
Reduce Plastic – Bring a Water Bottle!

Grayl Geopress Water Bottle

Always travel with a water bottle! They save you money and reduce your plastic footprint on our planet. The Grayl Geopress acts as a purifier AND temperature regulator. Boom!

Check out my definitive Hotel Packing list for even more top packing tips!

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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.

Looking for more info on travelling to Reykjavik and Iceland?
Have a wonderful time in Iceland!

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