Hnifsdalur is a hamlet on the Harpoon Bay and a part of the town Isafiord a few kilometres to the south. In earlier times, only two farms stood in the Hnifsdalur Valley and late in the 19^th century a hamlet started developing around the fish industry. The harbour conditions are not good enough for the larger vessels, which took over from the small, open boats. Therefore, the fishing vessels of Hnifsdalur bring their catch to the Isafiord harbour nowadays and the catch is transported on lorries to the factories in Hnifsdalur. The freezing plant was built in 1939.

The Hnifsdalur Valley is short, narrow, and surrounded by steep mountains. These conditions frequently create grave avalanche hazard during winter and most of the bungalows of the hamlet were built within unsafe areas before they were declared danger zones. This situation has rendered most properties totally worthless and requires the evacuation of the inhabitants when avalanche hazard exists. The most fateful of the many avalanches experienced every winter occurred on the 18^th of February 1910 when a few houses were swept out to sea and 20 people were killed.