Iceland's diminutive but colourful capital Reykjavik is a city break without the stress. Here you can live it up in the bars, unwind in the spas or simply breathe deeply. One of the city's key attractions is its pure air, and with 80% of Iceland's houses geo-thermally heated with hot spring waters, and the project for the first hydrogen-powered buses already underway, the Reykjavikurs aim to keep it that way.

The locals (180,000 in Reykjavik; 300,000 in Iceland) are a fascinating, volatile and contradictory people, as you would expect of this land of fire and ice, situated on the edge of the Arctic Circle on one of the earth's most volcanically active hotspots. These descendants of farmers love modern technology but eat dried fish, speak English fluently while remaining firmly attached to their own Germanic language, which hasn't changed much since the Vikings settled here in the 9th century. And although outgoing and friendly, there's nothing they like better than curling up with a good book. They read more than any other nation. In case you feel like accusing Icelanders of being parochial, remember that Iceland is, at 104,000 sq km, as big as England and Wales, and that their unofficial ambassador is style queen Bjork.

ACCESSIBILITY AND GETTING AROUND

Keflavik Airport is located 52km west (45 mins drive) of Reykjavik. From here take a Flybus coach and shuttle bus via a road through Iceland's stunning lunar landscape to your hotel (1,000kr). The same journey by taxi costs around 7,000kr.

Once in Reykjavik, free city maps are widely distributed but even without this you will soon familiarise yourself with the key city landmarks - the towering Hallgrimskirkja church, wide commercial thoroughfare of Laugavegur and Tjornin lake. The city centre is easily crossed on foot but buses (Mon-Sat 7am-midnight, Sun 10am-midnight) are frequent if you're feeling tired. Night buses run midnight-4am Friday and Saturday. Alternatively, travel by taxi (not too expensive in the city), or hire a bicycle.

To explore further afield, rule out rail - Iceland has no train service. Instead, consider joining a day or half-day coach tour with Reykjavik Excursions, hiring a car with a reputable firm (consult the tourist board) or taking an Icelandic Horse. This sturdy breed was brought to Iceland by the Vikings over 1,000 years ago.

BEST CULTURE

Hopping in and out of Reykjavik's museums and galleries can be as pleasurable as jumping in and out of the steamy spas. There is a cluster of galleries to choose from (even though a star attraction, the National Museum, is currently closed for renovation). Reykjavik Art Museum, located in a beautifully adapted warehouse building, opened in 2000 to display Icelandic Art, as quirky as the nation itself.

The highlight is the Erro Collection - whose psychedelic collages, sketches and paintings are scathingly humorous (Harbour House, Tryggvata 17; open daily 11am-6pm (Thu 11am-7pm). You don't even have to step inside a museum to appreciate the city's sculptures - from the statue of Ingolfur Arnarson (Iceland's first settler, who made his home in Reykjavik in 874) standing proud on the Arnarholl hill to Einar Jonsson's sculpture garden on the top of Skolavorduhaed (next to the Hallgrimskirkja Church) and the Viking Ship SunCraft, by Jon Gunnar Arnason - a metal skeletal structure which lies on the shore near the bay end of Klapparstigur. Take a peek, however, inside the white domed structure (which resembles a mini spaceship) of the Asmundur Sveinsson Museum (10am-4pm May-Sep daily; 1pm-4pm Oct-Apr daily). The former home and studio of the artist (1893-1982) is populated with sculptures inspired by Icelandic legend.

Dip into the Kjarval Museum (Flokagata; open daily 10am-5pm; Wed until 7pm) for a glimpse of Johannes S Kjarval's (1885-1972) romantic interpretation of Iceland's dream landscapes. Brush up your knowledge on Icelandic heritage at The Culture House (Hverfisgata 15; open 11am-5pm daily) and, for a bit of fun, nip into the Phallological Museum (Laugavegur 24; open Thu, Fri, Sat 2pm-5pm (also Tue & Wed summer) to see the stuffed/pickled male organs of mammals ranging from the whale to the reindeer and field mouse.

BEST FOOD AND DRINK

Go as exotic as you like - puffin, reindeer, sheep's eyes and ram's testicles are just a taster of what's on offer - or stick with what you know; fusion cooking is very popular in Reykjavik at the moment (there's even a McDonald's for the 100% unadventurous).

To make food reserves last through the winter, the Icelandic people became expert at smoking, salting, drying and pickling. Try sliced smoked lamb (hangikjot), smoked salmon with herbs (lax) on rye pancakes (flatkaka) or wind-dried haddock or cod (hardfiskur). Fermented shark (hakarl) is an acquired taste (made bearable when washed down with brennevin, a fiery liqueur distilled from potatoes and scented with caraway seeds). Fresh fish and seafood, and the creamy local yoghurt Skyr, on the other hand, are excellent, even for non-Icelanders.

While the choice of restaurants is wide, food and drink tends to be very pricey (1,000kr-7,000kr). One money-saver however is the water - sweet and pure from Icelandic springs. Only tourists buy mineral water.

Harbourside Tveir Fiskar, Geirsgata 9, serves beautifully served fresh fish. To taste traditional Icelandic cuisine, try romantic Laekjarbrekka, Bankastraeti 2). For sleek sophistication, dine at the Sommelier (Hverfisgata 46). Naust (Vesturgata 6-8) serves excellent fresh fish in a cosy interior resembling a Viking boat while the gleaming dome of the Perlan revolving restaurant on Oskjuhlid hill is a city landmark (Clinton dined here during his Reykjavik visit). First Vegetarian (Laugavegur 20b) serves moderately priced vegetarian cuisine while the Reykjavik Art Museum (Harbour House, Tryggvata 17) serves wholesome soups and decent pancakes for lunch. Taste dried fish or cinnamon biscuits in the food section of the flea market (see the shopping section).

BEST NIGHTLIFE

For such a little city, Reykjavik has a big nightlife - particularly at weekends when bars stay open until around 5am (instead of 11pm-3am). But there's no point hitting the bars until midnight - unless you want to play at Billy no Mates - Reykjavikurs don't go out until late. So you might as well take it slowly. Prepare for your big night with a steam at the spas (open until around 9pm). Take a leisurely meal. Then gingerly put a testing toe in the Reykjavik nightlife. It's easy to get chatting to the locals but be careful about the number of rounds you buy (beers cost around 400-550kr).

Begin sedately at the smart bar of the art deco Hotel Borg, Iceland's smartest hotel. Next door, Kaffi Brennslan, Postshusstraeti 9, is a laid-back venue with the best range of beer in the city plus decent brasserie-style menu. Hversfisbarinn by the National Theatre (Hverfisgata 20), transforms from leisurely daytime cafe to trendy bar in the evening, and is run by the same owner as Kaupfelagid (with weekend DJ) on the main shopping street (Laugavegur 3). Unless you want to join the teenyboppers, avoid the clubs Astro (Austurstraeti 22) and Nasa (Austurvollur). For a taste of home, stop at Irish pub, Gaukur a Stong, (Tryggvagata 22). Or mingle with the Icelandic trendy types at Kaffibarinn (Bergstadastraeti), in which Blur's Damon Alburn has shares.

SHOPPING

Although general shopping hours are 9am-6pm Mon-Fri, 10am-2pm/6pm Sat (most supermarkets and shopping centres open Sun too), many shops stay open until late in the evening.

Stroll the main shopping street Laugarasvegur for a choice of Icelandic fashions, hand-knitted woollens and handmade jewellery. Home from home is Top Shop on Laekjargata. More exotic is the Kolaportid Flea market (Tryggvagata 19; noon-6pm Fri; 11am-5pm weekends), located close to the Reykjavik Art Museum, where you'll find everything from dried fish to books in Icelandic, records, vintage clothes and bric-a-brac. Nearby, Skolavoroustigur, an attractive street in the shadow of the Hallgrimskirkja Church, is the best place for designer jewellery, art galleries and hand-knitted Icelandic sweaters (lopapeysa) at the Handknitting Association of Iceland (Skolavoroustigur 19). Out of town, choose from over 150 shops (including designer labels) at Kringlan and Smaralind shopping centres.

If you find yourself empty handed at the airport, peruse the Icelandic Store at Keflavik International Airport where you'll find everything from smoked salmon to Icelandic chocolate and cosmetic products made from the algae-rich waters of the Blue Lagoon. Lastly, don't forget to reclaim your 15% tax-free cash refund at the airport.

NATURE/BEST EXCURSIONS

Visitors catch their first glimpse of the incredible lunar landscape of Iceland on the drive from Keflavik Airport to Reykjavik (named by Iceland's first settler Ingolfur Arnarson in 874AD because he mistakenly believed that the plumes of steam rising from bubbling springs was smoke).

Iceland's awe-inspiring natural phenomena range from volcanoes to hot springs, the glimmer of the aurora borealis (the Northern Lights) on starry nights to glaciers covering over 11% of the interior, black volcanic sand, moss of every hue (very little of Iceland's surface is forested) and a wide variety of bird species - including gannets, razorbills, kittiwakes and puffin.

While in winter, darkness eats into the day, in summer you can experience the midnight sun, which illuminates the mountains and turns the moon a strange pink hue.

With such eerie natural formations, it's only natural that Icelandic legend is full of tales of wee people, from gnomes to elves, fairies, dwarves, mountain spirits and hidden people. The best place for sightings is said to be in the Reykjavik suburb of Hafnarfjordur, built on the 7,000-year-old Burfell lava formation.

Even on a short visit, you can take in at least some of Iceland's natural wonders. While you can hire a car, the easiest way to explore is with a Reykjavik Excursions tour bus. A day-tour (5,900kr) will whiz you around the 'Golden Circle', taking in the steamy, twisting waterfall of Gullfoss (meaning Golden Falls), the bubbling, sulphurous springs of Geysir (where the Strokkur pool expels a thirty-metre-high spout every eight minutes), the dramatic Kerid crater, and Thingvellir - the sacred site of Iceland's first parliament (founded in 930) and National Park, on the edge of the North American continental plate. Here the rift between the plates widens by 1.5cm each year, creating two natural 'walls' in the gap between.

Other natural wonders include the lava landscape of the Blue Lagoon, Mount Esja, the Eldfell Volcano on the Westman Islands (best reached from Reyjavik by a domestic flight) and Iceland's highest waterfall Glymur at the foot of the Hvalfjordur fjord. Opportunities for whale watching are best in July and August.

BEST SPAS

"You go to pubs. We go to baths". Reykjavikurs like to socialise while soaking in spa water. Visiting one of the city's seven spas is not only good for you (perhaps contributing to the long lifespan of Iceland's inhabitants, second only to the Japanese) and fabulous value (costing just 200kr, approximately #1.80), it's also an excellent way to meet the locals. Apparently, all-important decisions are made in the swimming pools.

There's no set format. But try building up from the cooler hot pots (around 37 deg C) to the hottest pot (a skin-reddening 42 deg C), then relax in the steam room before taking a leisurely lap or two in the outdoor pool, kept at a comfortable 29C.

Each of the baths has its own ambience. Try Vesturbaejarlaug (Hofsvallagata), which is basic but comfortable, Arbaejarlaug (Fylkisvegur; open until 10.30pm) with large waterslides for children, or Sundhollin (Baronsstigur) which has the city's only large indoor public pool and is located in a beautiful listed building.

For a taste of luxury, indulge at Mecca City spa and beauty parlour in eastern Reykjavik with a full body massage and hot volcanic rock treatment.

Relax before your flight home at the famous Blue Lagoon, whose steamy, silicon-rich geothermal sea waters, set in the middle of a lava field, are guaranteed to soothe.

When to Go

Situated on the very edge of the Arctic, Reykjavik is the world's most northerly capital, but though the country's interiors may be ice-bound (glaciers account for around 11% of Iceland's surface area), average temperatures in Reykjavik are 0% in winter and 15% in summer, not as cold as you might think.

There's always an occasion for celebration - in winter Christmas is celebrated with feasting, trolls and Jolaglogg (mulled wine). In February, join in the Food and Fun Festival (24 February-2 March). Skate by candlelight at the Northern Lights Festival (27 Feb-2 March). In summer enjoy the energy buzz of 24 hour daylight, swim in the geo-thermal Ylstrond beach, go whale watching or catch the Viking Festival.

Top Tips

Invest in a Reykjavik Tourist Card (24-hrs, 48-hrs and 72-hrs cards available) for free admission to the swimming pools, various museums, thermal pools, park, zoo and free bus transport. These are available at the Icelandic Tourist Board (Laekjargata 3, tel: + 354 535 5500) and, from February 2003, at the new city tourist board (Reykjavik Complete, Adalstraeti 2; Tourist Information +345 562 3045).