Lava from a large volcanic eruption in Iceland appeared to be flowing away from the only town in the area, offering hope that homes and lives would be spared even though the seismic activity could last months, officials said on Tuesday.

The government said flights were unlikely to be affected, quashing international travel concerns lingering after the chaos that resulted from the ash cloud caused by an eruption on the north Atlantic island in 2010.

The eruption late on Monday on the Reykjanes peninsula in southwest Iceland spewed lava and smoke more than 100 metres into the air after weeks of intense seismic activity.

"The eruption does not present a threat to life," an Icelandic government statement said. "There are no disruptions to flights to and from Iceland and international flight corridors remain open."

Authorities last month evacuated the nearly 4,000 inhabitants of the fishing town of Grindavik about 40 km southwest of capital city Reykjavik, letting them in intermittently to check on homes put at risk by the tremors.

Hans Vera, 56, originally from Belgium but living in a house just east of Grindavik since 1999, had just begun getting his hopes up that residents would be allowed to return to home for good, or as close to it as is possible on a volcanic island.

But that all changed when the eruption finally arrived after weeks of anxious waiting.