A volcanic earthquake with Mw 5.6 occurred beneath the Bárdarbunga caldera in Iceland on 29 September 1996. This earthquake is one of a decade-long sequence of events at Bárdarbunga with non-double-couple mechanisms in the Global Centroid Moment Tensor catalog. Fortunately, it was recorded well by the regional-scale Iceland Hotspot Project seismic experiment. We investigated the event with a complete moment tensor inversion method using regional long-period seismic waveforms and a composite structural model. The moment tensor inversion using data from stations of the Iceland Hotspot Project yields a non-double-couple solution with a 67% vertically oriented compensated linear vector dipole component, a 32% double-couple component, and a statistically insignificant (2%) volumetric (isotropic) contraction. This indicates the absence of a net volumetric component, which is puzzling in the case of a large volcanic earthquake that apparently is not explained by shear slip on a planar fault. A possible volcanic mechanism that can produce an earthquake without a volumetric component involves two offset sources with similar but opposite volume changes. We show that although such a model cannot be ruled out, the circumstances under which it could happen are rare.