Stretching about 30 km inland, Reyðarfjörður is East Iceland's longest fjord and has excellent harbour conditions. Here you'll find Reyðarfjörður Town, the second largest town in Fjarðabyggð. The Molinn shopping mall and the local bakery at the town center are popular stopping places. A nearby walking trail, starting at the bridge over Búðará river, will lead you up along the pretty river bed to the Icelandic Wartime Museum. A bit further up is a beautiful waterfall and a dam for a small hydrological power plant, which was considdered a major undertaking when is was under construction in the late 1930's.

On the coast easst of the village, Mjóeyri Harbour represents one of Iceland's leading ports for freight export. The Alcoa Fjarðaál aluminium smelter is located just beside the harbour, as well as the municipal fire and emergency department.

Reyðarfjörður became known worldwide when the British military trooped on shore July 1, 1940, only a few months after the Allies had taken over Iceland for the duration of the World War II. The change was sweeping, the troops outnumbering by ten-fold the village residents. Since then another invasion has taken place, this time by the British-American producer of the thriller series Fortitude. Both the town and the majestic landscape play a big part in the international TV thriller.

The town takes its name after the adjacent Reyðarfjörður fjord, but in the early days of the settlement the village here was known as Búðareyri. Two brothers from Norway, Friðrik and Ottó Wathne, were at the turn of last century the local pioneers of trade and commercial fishing. After a road was built over the pass in 1920 and cars became more common, Reyðarfjörður grew rapidly, serving as the main trading point for Fljótsdalshérað.

Although catching and processing fish remained important here, thease indurstries played a smaller part in the economy than in most other towns and villages on the east coast. Trade, services and transportation, on the other hand, played large roles, especially after the road link to Fljótsdalshérað was completed. Nowadays, the fishing industry is negligible here, and the local economy focuses instead on service industries. Fjarðabyggð’s main municipal office is in this town, along with the East Iceland headquarters of the Icelandic Road Administration.

The local electric power utility began operating in 1930 and is still running, although in order to satisfy local energy needs, it has been connected since 1958 to supplemental electricity from Iceland State Electricity. The population has gradually increased, with around 300 residents in 1930, 360 in 1941, 730 in 1990 and about 1,200 today.