Flateyri has been a trading post since 1792, and temporarily became a major whaling center in the 19th century.
In October 1995 an avalanche hit the village, destroying 29 homes and killing 20 people. Since then a deflecting dam has been built to protect the village from any further avalanches.
The Esso gas station in Flateyri was the subject of a Belgian documentary in a series about gas stations around the world.