The Tjörnes fracture zone in North Iceland and the South Iceland seismic zone are ocean-ridge discontinuities that are partly exposed on land. These are zones of high seismicity, but contrasting style of crustal deformation. Detailed field studies and numerical modelling suggest that the Tjörnes Fracture Zone has all the characteristics of an oceanic transform fault, is 7–9 Ma old, and developed along the zone of maximum shear stress between the nearby tips of the rift zones of the Kolbeinsey Ridge and North Iceland. Conversely, the results indicate that the South Iceland seismic zone developed within an area of shear-stress concentration between the overlapping rift zones in South Iceland. The development of the South Iceland seismic zone is a consequence of the propagation of the eastern rift zone to the southwest during the past 3 Ma.