A JOURNEY IS LIKE MARRIAGE
THE CERTAIN WAY TO BE WRONG IS TO THINK YOU CONTROL IT
CAMPING IN THE WILD
Camping in the wild in Iceland is easy and fun.
Camping with no more than three tents is allowed on uncultivated ground for a single night, unless the landowner has posted a notice to the contrary. However, campers should always use designated campsites where they do exist.
Do not camp close to farms without permission. If a group of more than three tents is involved, these campers must seek permission from the landowner before setting up camp outside marked campsite areas.
So, if there is no sign, and the land isn't being used to grow things, you have the right to camp there for one night. That is pretty much all the law says.
You can camp at the side of the road, IF there is a place to park your car. You should not park your car on the land.
Do not drive off the road or track. Motor vehicles can leave marks that last for generations. Driving off roads or tracks is against the law except when the ground is frozen and covered in snow. See further information under “Practical Information/Driving in Iceland”.
Staying away from houses is just a basic courtesy. The best rule of thumb to follow in my experience is to never be close enough that you can see anything in the windows, and definitely stay away from gardens and obviously enclosed personal space. 300 meters at the minimum.
Se more at: