On Location: Reykjavik

The ambient, atmospheric sounds of Iceland's best-known exports—Björk and Sigur Rós— are the perfect soundtrack to the country's barren rock-scapes—believed to be inhabited by elves. Iceland's climate and terrain is so otherworldly—glaciers, geysers, and lava deserts dot this island in the Artic Circle —that NASA astronauts come here to train.

In contrast, the capital, Reykjavik, is a thriving, cosmopolitan city that plays host to great music, fashion, and art scenes. About two-thirds of Iceland's population is concentrated in Reykjavik, and yet it maintains a small-town feeling with its technicolor houses and mountain-flecked coastline. Though the shopping strip is also small (concentrated on and off the main street, Laugavegur), the selection of boutiques and the scope of designers confirm Reykjavik's place on the cutting-edge fashion landscape.

The city's compact layout encourages a sense of community and so do its many stores and cafés where young creatives converge for coffee and conversation (and to road-test their daring haircuts). Stores' purposes are manifold: they double as art galleries, hair salons, and concert venues. In fact, many local designers seem to have rented boutiques just so all their friends can hang out in them.

Here is a roundup of our favorite shops:

• Sputnik, 28B Laugavegur, +354 561 7060

Vintage fashion is a way of life in Reykjavik, and locals pride themselves on well-scoured finds and eclectic decade referencing ensembles. To fit in, or rather stand out, look no further than Sputnik. Wallpapered in a kitschy mish-mash of 70s graphics, Sputnik isn't the place to find designer labels. Instead trust the incredibly well-dressed shop girls, and when they tell you something looks good: buy it. Clothing is well-edited and grouped by category—pants, jackets, lingerie, even a section devoted to awesomely tacky bedazzled T-shirts. The front of the store doubles as a record shop and the separate back room is crammed with an incredible selection of vintage boots, pumps, and handbags that could put the East Village's notion of vintage to shame.

• Smekkleysa Plötubú, (Bad Taste Records), 59 Laugavegur, +354 534 3730, www.smekkleysa.net

A bastion of independent music, this record shop is quite literally underground: It's located beneath Reykjavik's largest supermarket. Bad Taste Ltd. is actually a record label founded by members of The Sugarcubes who have signed Iceland's biggest exports- Björk, Gusgus, and Sigur Rós, and its up-and-coming ones Hairdoctor, Mammút, and Múm. Named for Picasso's belief that "Good taste and frugality are the enemies of creativity," Bad Taste Ltd. delves into any artistic realm it can, including publishing greeting cards and poetry, and hosting a radio station. The shop is no exception: besides a great selection of local and international music, the store houses an art gallery and stages in-store concerts every Friday and Saturday.

• Naked Ape, 14 Bankastraeti, +354 534 3535, dontbenaked.com

"Clothing, Art, Music, Design" advertises a hand-painted sign pointing to the somewhat confusing entrance of the Naked Ape store, perched above a souvenir shop on Laugavegur. Opened in the summer of 2005, Naked Ape is run by a collective of young hipsters, who blast crazy doodle graphics onto hoodies, tees, and leggings in the backroom. Their cool '80s graphics in Lite-Brite colors look like something out of Sri Lankan superstar M.I.A.'s Galang video. Christmas lights and chandeliers made from magnifying glasses illuminate the thrown-up murals, and turntables are on hand for impromptu dance parties. In addition to their own brand, the shop stocks accessories, CDs, DVDs, and books by local Icelandic artists. If the cool surroundings make you realize you need a little freshening up—walk two paces to the back of the store (read: it's a tiny operation) and let Kolbrún work his magic in the hair studio called, "Can I Cut You?"

• Trilogia, 7 Laugavegur, +354 551 1733, http://trilogia.is

There's a good chance Trilogia will blow your mind. Apparently the selection of designers is already blowing the minds of regular shoppers, because according to the shop's buyer they've nearly sold out of their summer stock. Opened in spring 2005, Trilogia embodies Reykjavik's mishmash model for boutiques: They are at once the place to find bellwether designers, an artist's gallery, and a production company. The shop carries an offbeat array of designers with both an international and independent perspective: Preen (a Refinery29 favorite), Spijkers en Spijkers, La Petite Salope, Erotokritus, and Rogan are shown alongside lesser-known talents like UK-based Fhomme and Icelandic designers, Aftur and Shoplifter, as well as a self-produced house brand of contemporary basics designed by owner, Jette Jonkers. Fledgling designers are carried on commission with the prospect of being produced by Trilogia. Meanwhile, the shop is transformed into an art gallery regularly to create a bridge between fashion and local works, get people into the shop, and, well, because "It's a fantastic reason to throw a party," says Jonkers.

• KronKron, 63B Laugavegur, +354 562 8388 and Kron, 48 Laugavegur, +354 551 8388

These sister shops alone are enough to make Reykjavik an immediate shopping destination. Two months ago Kron, a mausoleum for shoes on the Laugavegur strip, mutated into KronKron—a much larger space dedicated to men's and women's clothing and accessories. With its Gobstopper-colored walls and waterfall of lights, Kron is as festive as the Spanish labels it carries: Camper, Salvador Sapena, and Again & Again. The carnival spirit continues at KronKron, a veritable fashion circus starring all the best misfits and clowns: Peter Jensen, Henrick Vibskov, Marjan Pejoski, Vivienne Westwood, and Camilla Staerk. Up front, Eley Kishimoto-printed kicks, bawdy Tatty Devine Perspex jewelry, and WoodWood printed T-shirts cater to the street-style fashion-forward. In the middle of it all hang voluminous satin dresses twisted into origami rosettes by the much-buzzed-about London-based Serbian designer, Roksanda Ilincic. KronKron's pastiche of designers embodies its motto: great design that doesn't take itself too seriously.

• Kisan, 7 Laugavegur, +354 561 6262, http://kisan.is/

Children, Francophiles and design addicts unite! It's a strange brew in this concept store- offering something for the whole family (and it works wonderfully). The Icelandic-French connection is well represented by Isabel Marant's romantic pieces, Jerome Dreyfus's butter-soft leather accessories, Jamin Puech's embellished bags, and Nathalie Costes' big-bead necklaces. Kids can blend in with their parents' Eames decor by sporting printed T-shirts, shoes, and accessories from various Euro labels. The rest of the shop is a potpourri of life's essentials: rich Coté Bastide bath products, titanium luggage, art tomes, and design curiosities like an electric squirrel lamp. Admit it, you want it.

Shopping note to readers: Stay tuned for mega lifestyle emporium 06.10 (60, Laugavegur), which will be in the vein of Paris' Colette and is set to bow in.

• Vin og Skel (Wine & Shell), 55 Laugavegur, +354 534 4700
The fresh seafood menu is written daily on the blackboard in this excellent, smoke-free (an anomaly in town) restaurant staffed by tattooed cool kids on their best behavior.

• Grand Rokk, 6 Smijustigur, +354 551 5522
Never have two floors seemed so disparate: the lower level is a smoky den of middle-aged guys playing chess; the upper level is the closest thing to a gritty New York club: cheap-ish drinks and a great place to catch local talent.

• Prikid, 12 Bankastraeti, +354 551 3366
A cozy pub-like space where laptop toting beautiful people drink coffee by day and dance up a storm by night. While it looks slightly rustic, the crowd is thoroughly modern. To wit, if you ask for Brennivin, the extremely potent traditional liquor dubbed Black Death, the bartenders will scowl and inform you that "only old people drink that."

• Sirkús, 30 Klapparstigur
Wait in line like a local, but push like an American. This tiny cesspool of debauchery has a perpetually long queue on the weekends. A former stomping ground of Björk's, it's where she returned with Spike Jonze to film her video for "Triumph of the Heart."

• Apotek, 16 Austurstraeti, +354 575 7900
This former apothecary is now ensconced in white leather and filled with gorgeous guys and girls. An excellent, though varied menu—from sushi to pasta—keeps the space packed, so make a reservation.

• Solon, 7A Bankastraeti, +354 562 3232, www.solon.is

Coffee, dinner, and dancing are all served at different hours in this café/bar/nightclub that also considers itself a gallery, thanks to the frequently changing artwork. Log onto the website to see photos documenting last night's excess, à la www.lastnightsparty.com.

• Mokka, 3A Skólavördustíg, +354 552 1174, www.mokka.is

Reykjavik's oldest coffee shop is everything you'd imagine: plush booths, stained glass, and dark as film noir with its scarlet walls stained dark by nicotine. Even the locals will tell you—the waffles with fresh cream and berries are incredible.

This magical city of glaciers, geysers, and Sigur Rós is not only where Nasa astronauts train (and where elves are believed to exist), it's where loads of the global style-minded are heading to shop. Refinery29 reports back from Iceland's mysteriously enchanting capital.