The people of Grindavik were evacuated on 11 November after a series of earthquakes, considered a possible precursor to an eruption.
ADVERTISEMENTEvacuated residents of the town of Grindavik in Iceland began returning on Thursday.
Only daytime visits were permitted as the volcano decreased in intensity, dashing their hopes of spending Christmas at home.
The eruption, which began on Monday evening, opened a fissure in the ground about four kilometres long. Glowing fountains of orange lava were spewed into the sky only three kilometres from Grindavik.
By Thursday, the eruption had declined in intensity and lava flows could no longer be seen on live video feed.
"The likelihood of a new eruption forming without warning near Grindavik has decreased," the Icelandic Meteorological Office (IMO) said late Wednesday.
But it said the "hazard level in that area is nevertheless considered substantial" as "the magma can reach the surface quickly, leaving little time to issue warnings."
Authorities allowed Grindavik's 4,000 residents access to the small fishing port between 7:00 am and 4:00 pm.
They were evacuated on 11 November after a series of earthquakes, considered a possible precursor to an eruption.
First responders were present in the town on Thursday in case an emergency evacuation was required.
Streets of the town were still largely empty on Thursday morning, with Christmas decorations the only lights coming from the abandoned houses, according to an AFP correspondent at the scene.
But some residents were quick to get back to work, including the staff at fishing company Thorfish who rushed to save the catch caught just before the eruption.
"Now they are trying to pack it and prepare it so it won't get damaged, and then clean up the whole place for Christmas," Jon Emil, purchasing manager for Thorfish, told AFP outside the packing plant.