Iceland is one of those northern European countries where isolated landscapes still retain a touch of ancient magic.
On this island, home to barely 400,000 people, there are places so inhospitable that permanent settlement is nearly impossible.
That is why the vast majority of the population lives in and around the capital, Reykjavík.
There are other towns in the south, but as you head north, they grow smaller and more spread out.
If you follow the Ring Road that circles the island and venture east, you will reach a place steeped in legend: the realm of fairies and elves.
It is a region known as Álfaborg, which literally translates to “city of the elves.” The landscape is filled with winding streams, deep lakes, and dreamlike mountains—a setting fit for mythological beings who may be more real than we think.
In fact, for Icelanders, these creatures share our world, though they prefer to stay hidden in nature.
A visit to Álfaborg might just offer a glimpse of this hidden world to those who believe.
The Place Where Fairies and Elves Rule
Getting there is no easy feat. It lies on the far side of the island from Reykjavík, so the drive can take over 9 hours.
Once you reach Iceland’s eastern coast, the larger towns give way to tiny villages of just 100 or 200 inhabitants.
One such village is Bakkagerði, where, according to ancient Icelandic folklore, the Huldufólk—the “hidden people”—are said to live.
As you approach this beautiful fishing village, you’ll notice small, picturesque houses that appear to be uninhabited.
Uninhabited by humans, that is. According to tradition, these are the homes of the magical folk. The village is built at the foot of a hill named Álfaborg, which, legend says, is the home of the powerful Hildur, queen of the elves.
To visitors, this may all seem like a charming way to keep traditional Icelandic stories alive.
However, you might be surprised to learn that nearly half the local population believes in elves.
According to believers, the Huldufólk are beings much like humans who live in communities but remain invisible to us, choosing to keep their distance.
They must be experts at hiding, because even now—despite a walking path that circles the hill—no one has spotted them yet.
Fascinating Creatures of Icelandic Folklore
Hildur, also known as Borghildur in many legends, is the elven queen of the region, whose beauty still inspires awe.
Icelandic folklore is deeply woven into the culture and is still actively kept alive by its people.
Like other Nordic countries, Iceland boasts a wealth of sagas — legendary tales that recount the Norse settlement of the island, feuds between rival clans, and battles between humans and magical beings such as elves.
It is not far-fetched to imagine that some of these sagas, such as Egils’ Saga or Njáls’ Saga, inspired J.R.R. Tolkien in creating Middle-earth.
The British writer, fascinated by Icelandic myth, drew heavily from the island’s legends to shape his elves: quasi-divine creatures, impossibly beautiful, and fierce warriors when the need arose.
The sheer beauty of these landscapes has also helped keep such tales alive over the centuries.
When you arrive on Iceland’s eastern coast, it’s easy to imagine that if elves truly exist, this is exactly where they would live.
It may not exactly resemble Tolkien’s Lothlórien, but it certainly evokes the ancient forest realms where Tolkien’s elves once dwelled.
In fact, Iceland’s largest forest, Hallormsstaður, is also located in the eastern fjords.
Here, nature reigns supreme, and magic feels more real than anywhere else on the island. The presence of elves, fairies, and sprites seems to linger all around you, as though you’ve stepped into a fantasy realm.
