The historical village of Djúpavík dates back to 1917, when a herring factory was established in this small creek by the fjord Reykjarfjörður. The first attempt was short lived but in 1934 a new factory was erected, the largest concrete house in Iceland at the time. The factory operated until 1954, but today it serves as an exhibition building. The houses in Djúpavík are only used as summer dwellings today, except for the hotel, Hótel Djúpavík, which is open all year.
Prior to 1917, the area around Djúpavík hosted farmsteads for hundreds of years. Around 1916 only one family lived there.
The village of Djúpavík was first settled in 1917 when Elías Stefánsson built a herring salting factory there. Guðjón Jónsson moved to Djúpavík in 1917 with his wife Krístín Guðmundsdóttirthe and three children to serve as the factory's supervisor. They were the village's first residents. That year brought many challenges to the herring industry in Iceland. There were shortages of fuel oil and salt, and the import price of coal and other supplies rose sharply. Both cod and herring catches were small. In the following year, the Armistice of 11 November 1918 led to reduced demand for exports from Iceland. The enterprise went bankrupt in 1919. Although the business was briefly taken over by others, the site was abandoned during the 1920s. Guðjón stayed on at the factory until 1921.
1934 saw the resettlement of Djúpavík with the foundation of Djúpavík Ltd. in September of that year. A new factory was built (at the time of its construction it was the biggest concrete building in Iceland and one of the biggest in Europe) and, despite the harsh conditions, the construction was completed within the span of just one year and the factory was operational by July 1935. Herring catches started to decline after 1944, with a sharp drop in 1948 (when there were almost no catches for two years) and, despite attempts to keep the enterprise running by processing other fi