"It's not like they think there are little people living in there who come and dance outside," he added. "It's more a sense that there are other powers, other forces around them."

This town, a port on the outskirts of Reykjavik, prides itself on its unusually high elf population. Tourists are invited to tour the known elf locations, including a large rock whose reputation as an elf habitat meant that a nearby road was diverted some years ago so as not to disturb its unseen residents.

Elly Erlingsdottir, head of the town council's planning committee, said that made sense to her. Recently, she said, some elves borrowed her kitchen scissors, only to return them a week later to a place she had repeatedly searched. "My philosophy is, you don't have to see everything you believe in," she said, "because many of your greatest experiences happen with closed eyes."

Recently, the planning committee considered a resident's application to build a garage. "One member said, 'I hope it's O.K. with the elves,"' Ms. Erlingsdottir related. Should the council determine that it is, in fact, not O.K. -- usually this happens when a local mystic hears from the elf population, directly or through a vision -- the town would consider moving the project, or getting the mystic to ask the elves to move away, she said.

Such occurrences are not unusual. In nearby Kopavogur, a section of Elfhill Road was narrowed from two lanes to one in the 1970's, when repeated efforts to destroy a large rock that was believed to house elves were thwarted by equipment breakdowns. The rock is still there, jutting awkwardly into the road, but it is unclear whether the tenants are.

"With the artificial lampposts, there's too much light for them, and there's also too much noise," explained Gurdrun Bjarnadottir, who has lived across the street for some 30 years. "A lot of people believe they still live there, but I think they've moved."

In the same town in 1996, a bulldozer operator, Hjortur Hjartarson, ran into trouble as he tried to raze a suspected elf hill to make way for a graveyard.