Everyone said you could buy yarn everywhere in Iceland including at the grocery store. This is both true and not true. While I did find yarn in some grocery stores, definitely they don’t all carry this staple. But then many didn’t carry gluten free staples either.
I found that the grocery stores in Reykjavik in the city center did not have yarn. For that you should go to the Handknitters Association of Iceland. You can also pick up a handknit sweater while you’re getting your yarn.
In the rural north of Iceland where I spent most of my time, all the grocery stores I went into except the one in the town I was living in, Blönduós, had yarn. All of them. These are small stores with limited shelf space but even the smallest had at least one shelf tucked somewhere to the side full of yarn.
On the day we went looking for seals on the Vatnsnes peninsula, we ended the day at the Seal Center in Hvammstangi and their grocery, though small, had a nice selection of natural colors of Lopi.
And we had two visits to Sauðárkrókur which had the largest grocery store we went in anywhere in Iceland. It was rather fun to be buying enough groceries to need a cart and to have yarn mixed in with the celery.
Yarn at the Keflavik Airport
And yes, you can even get Lopi yarn at the airport on your way home.