Founded in the 16th century, Keflavík developed due to its fishing and fish processing industry. Later its growth continued from flight operations at the Keflavík International Airport which was built by the US during the 1940s. The airport used to hold a significant NATO military base and was a vital pre-jet refueling stop for trans-Atlantic commercial air traffic.
During WWII the military airfield served as a refueling and transit depot. In the Cold War, Naval Air Station Keflavik played an important role in monitoring marine and submarine traffic from the Norwegian and Greenland Seas, into the Atlantic Ocean. During the Cold War, forces from the United States Air Force were added to provide radar monitoring, fighter intercept, in-flight refueling, and aerial/marine rescue. After the collapse of the Soviet Union, however, the base's role was cast into doubt, as there was little threat from Russian long-range bombers or from hostile submarines carrying SLBMs passing through the North Sea into the Atlantic. The base officially closed on September 30 2006, as the United States withdrew the remaining 30 military personnel. The Airport remains, serving as Iceland's main international hub.
In Iceland, the town was renowned as a rich source of musicians during the 1960s and 70s, and is therefore also known as bítlabærinn or "The Beatle Town".