An earthquake measuring 6.1 on the Richter scale shook the town of Selfoss, 50 kilometres south-east of Reykjavik, Thursday, causing severe damage to buildings, dpa reported.
Police said that nobody had been killed or injured in the earthquake.
However, it caused a great deal of damages to buildings in the area near the epicentre.
Reykjavik residents reported feeling houses shake in the city even though the epicentre was 50 kilometres away and 10 kilometres beneath the earth's surface.