Residents in Grindavik were evacuated about 3 a.m. (0300 GMT) when seismic activity increased overnight, according to Icelandic public television RUV.
"A crack has opened up on both sides of the dikes that have begun to be built north of Grindavik," according to the meteorological office.
Jets of brilliant orange lava were seen erupting up against the gloomy winter sky in live footage.
Iceland's fifth volcanic eruption in two years occurred on December 18 in the same location southwest of the capital Reykjavik.
On November 11, Grindavik, a small fishing community of about 4,000 inhabitants, was evacuated as a precaution.
Residents have been allowed to return for brief periods before being asked to evacuate again overnight.
Iceland has the most active volcanic systems in Europe, with 33.
Iceland is located in the North Atlantic, straddling the Mid-Atlantic Ridge, a rift in the ocean floor that separates the Eurasian and North American tectonic plates.
Despite a previous evacuation, a volcano erupted in southwest Iceland on Sunday, posing an immediate threat to a nearby tiny fishing village.
Early-morning film showed the eruption north of Grindavik, displaying molten rock gushing from fissures and brilliant orange lava against a dark sky.
Iceland's President Gudni Johannesson declared that no lives were under danger, though infrastructure might be jeopardized. Grindavik had been evacuated for the second time in a month due to a possible outbreak indicated by seismic activity.
Barriers were being constructed to keep lava from reaching Grindavik, which is located 40 kilometers southwest of Reykjavik. The most recent eruption, however, appeared to have breached the town's defenses.
A #volcano in #Iceland erupted after hundreds of #earthquakes shook the Reykjanes peninsula pic.twitter.com/9qrkza3EKY
— Dragonfly (@DragonflyTimes) January 14, 2024
According to the Icelandic Meteorological Office, a crack was opening on both sides of the defenses, and lava was rushing toward Grindavik, getting within 450 meters. According to flow models, if the current course continues, the lava could reach Grindavik in a matter of hours.
This is the second volcanic eruption in less than a month on Iceland's Reykjanes peninsula, and the sixth since 2021. The last Svartsengi volcanic system eruption forced the evacuation of Grindavik residents as well as the closure of the famed Blue Lagoon geothermal spa. Despite the fact that over 100 Grindavik residents had recently returned, a new evacuation order was issued on Saturday.
Because of the competing motions of the Eurasian and North American tectonic plates, Iceland experiences frequent seismic and volcanic activity.
While the Reykjanes volcanic systems are not locked beneath glaciers like Eyafjallajokull, which caused ash clouds to strike Europe in 2010, they continue to be key geological hotspots.
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