With 343,518 inhabitants (2018), Iceland is a very sparsely populated country for its size, and when you do the math the ratio is around 3.2 inhabitants per square kilometer. Most of the population is in Reykjavík, nearby 66% living in the capital and its suburbs.
Iceland is divided into 8 major administrative regions, each with a “capital”:
These regions are used almost exclusively for statistical data and postal codes and do not have a major role, unlike cities and municipalities.
Municipalities are cities, towns, or groups of smaller towns. Altogether there are 76 of them in all of Iceland, and only 50 of these have more than 300 inhabitants. These 50 are indicated on the map above.
The 3 colors indicate the size:
The map clearly shows the trend, with most of the population is in the south-west, near the capital. And even more obvious is the negative space, with the center of Iceland, the south and the north-east having very few “cities” of significant size.
Municipalities rather than regions are the units that manage local government:
Credit map of the regions: Wikipedia/Jlechuga86.