The development of this hamlet started in the first half of the 20th century, when thermal activity was discovered in the area. In 1928 a primary boarding school was built. Around the middle of the century the cultural community centre, Aratunga, was built and named after the author of The Book of Icelanders. Reykholtshver is a regularly spouting hot spring. The inhabitants base their livelihood mainly on horticulture, small industries and tourism. An increasing number of visitors pay Reykholt a visit, because of the proximity of the popular tourist attractions The Golden Waterfalls and the Geysir Area, and the increasing number of holiday houses built in the vicinity.
The distance from the capital is about 95 km.