Authorities say the remote volcano is likely to erupt after increased seismic activity.
Iceland has raised its eruption alert level for the country's most active volcano, Grímsvötn, after several recent earthquakes.
Authorities said on Monday that one of the nearby quakes was recorded at a magnitude of 3.6.
But although seismic activity had increased, officials say they have not detected any tremors that have caused a surge in underground magma.
The volcano last erupted in 2011, generating a major ash cloud that partially disrupted air traffic across Europe and cancelled 900 flights.
However, the eruption was much less severe than the Eyjafjallajökull volcano in 2010, which cancelled 100,000 flights cancelled and stranded ten million passengers.
The Grímsvötn volcano is located in an uninhabited and inaccessible area in the centre of Iceland, under an enormous glacier.
It had already been under surveillance after a flood linked to the rupture of a glacial lake, which could trigger an eruption.
On Monday, the Icelandic Meteorological Office (IMO) raised its alert level to "orange" due to "high seismic activity".
A "red" level warning means that an eruption is imminent and the emission of volcanic ash will likely disrupt air traffic.
"This seismic activity may be due to the decrease in pressure above the volcano, as the floodwaters leave the Grimsvötn subglacial lake," the IMO said.
Recent eruptions of Grimsvötn have occurred approximately every five to ten years.