It is the third-most populous city in Iceland, after Reykjavík and Kópavogur. Hafnarfjörður has established local industry and a variety of urban activities, with annual festival events.
The town is the site of an annual Viking festival, where Viking culture enthusiasts from around the world display reconstructions of Viking garb, handicraft, sword-fighting, etc.
Tourists with a New Age mindset enjoy a guided tour of the habitats of elves and other hidden people in the town area.
Hafnarfjörður is now arguably considered to be the rock n' roll capital of Iceland (a title that once belonged to Keflavík). Popular Icelandic bands such as Botnleðja, HAM, Sign, Lada Sport and Jakobínarína all trace their origins to the town of Hafnarfjörður.
Just two kilometers (1.2 miles) outside of Hafnarfjörður is an aluminium smelter, run by Alcan. Alcan has applied for an extension for the smelter, which will make it the fourth-largest smelter in Europe. The local governing body has sold Alcan land for the extension, Alcan has received permission for the extension from the government and a deal has been struck for selling energy to the smelter, even though the neighbouring area is the only place around Hafnarfjörður with available domestic building area for Hafnarfjörður.
The smelter was originally built in 1969, and it has improved its cleaning process since then, especially regarding fluoride. The effect that the extension would have on the environment and the local residents was, though, a huge concern for the people of Hafnarfjörður.
Local elections were held in May 2006, where the people of the town voted against extension of the smelter.
Hafnarfjörður takes its name (meaning harbour fjord) from the area's excellent natural harbour. The town is first named in the medieval Landnámabók, and the earliest reports of voyages to Hafnarfjörður date from the end of the 14th century. Englishmen began trading in Hafnarfjörður in the 15th century, but German merchants followed in their wake and eventually drove the English out. The first Lutheran church in Iceland was raised at Háigrandi, opposite Óseyri, just outside the small boat harbour in 1533. After that, the Hanseatic traders prevailed in town until 1602, based at Hvaleyri. At this point, the Danish monarchy established a Danish trade monopoly in Iceland which lasted until late in the 18th century. During this period, Hafnarfjörður was the nation's busiest trade centre.
In 1793, Bjarni Sívertsen settled here and became influential in local business and international trade, setting up a major commercial fishing operation. His enterprise and initiative signaled the start of impressive commerce in the town. Ever since, he has been called "the father of Hafnarfjörður" and nicknamed "Sir Bjarni." Around 1870, dramatic changes took place in Icelandic fishing. Residents followed the growing trend in Iceland of using decked boats rather than row-boats. This led to even more employment and rapid growth, and Hafnarfjörður attained official municipal status in 1908. The first mayor was Páll Einarsson, who later became the mayor of Reykjavík. The first road between Reykjavík and Hafnarfjörður was finished in 1898. The first hydrological power plant in Iceland was built in Hafnarfjörður in 1904.
The Coot, Iceland's first trawler, operated from Hafnarfjörður between 1905 and 1908. Its boiler stands by the roundabout on the junction of Reykjavíkurvegur, Strandgata and Vesturgata. A harbour for large commercial ships was raised in 1912, and the first car arrived in 1913.
After World War II, more advanced trawlers and numerous motorised ships were added to the fleet. The town's first stern trawler appeared in 1973. Today, Hafnarfjörður is one of the nation's largest fishing centers and the site of Iceland's first fish wholesalers' auction market. Through the years, Hafnarfjörður's dynamic local economy has been strongly linked to fishing, although freight transport has recently become the major harbour activity. And now, the town is Iceland's second-ranked import and export harbour.
The events include short movies and concerts and usually conclude on a day commemorating the sailors of Iceland.
Each year on the summer solstice a Viking festival is held in Hafnarfjörður. A local pub and restaurant, Fjörukráin, started the festival and maintains it to this day.
Hafnarfjörður has three swimming pools, despite its low population. This is common for any town in Iceland, due to the geothermal energy.
There are two major sport clubs in Hafnarfjörður the first being Fimleikafélag Hafnarfjarðar (FH) which have won the Icelandic premier football league, Pepsi-Deildin eight times between 2004 and 2016(2004-2005-2006-2008-2009-2012-2015-2016). FH have won the Icelandic Handball league in total of 25 times and have won the cup 6 times which makes them the most successful team competing in Icelandic handball.
The second club is Knattspyrnufélagið Haukar. Haukar have a magnificent history in handball with many titles. Haukar were champions in 1943, 2000, 2001, 2003, 2004, 2005, 2008, 2009, 2010 and 2015 and cup holders in 1980, 1997, 2001, 2002 and 2010.
Hafnarfjörður also has a gymnastics club, Fimleikafélagið Björk, established on 1 July 1951.
Local swimming club, Sundfélag Hafnarfjarðar (SH), was established on 19 June 1945. The triathlon club 3SH, is part of the club.
Keilir Golf Club is an 18-hole golf club and course located on the Hvalreyi peninsula.
In the 1986 novel Red Storm Rising by Tom Clancy, the Soviet Union gains a dramatic strategic advantage at the beginning of the war by seizing Iceland with a Guards Airborne division transported secretly by converted freighters. When the US Marine Corps retake Iceland, they initially land at Hafnarfjörður before advancing on Keflavik. Additionally, in the novella, The Odd Saga of the American and a Curious Icelandic Flock, Snorri calls Alex in the middle of the night to tell him that he is passing through Hafnarfjörður and will be picking him up shortly for a trip to Snæfellsnes.