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Egilsstadir is located at Coordinates: . The town is young, even by Icelandic standards where urbanization is a fairly recent trend compared to mainland Europe. It was established in 1947 as an effort by the surrounding rural districts recognising it had become a regional service center. The town, which is named after Egilsstaðir farm, is near the bridge over Lagarfljót where all the main roads of the region meet, Route 1 as well as the main routes to the Eastfjords.
Egilsstaðir has grown to become the largest town of east Iceland and its main service, transportation and administration center. The town has an airport, college and a hospital. The town grew quickly during the economic boom in the region from 2004 to 2008 associated with the building of the Kárahnjúkar Hydropower Project and Alcoa's aluminium smelting plant in Reyðarfjörður. The growth has slowed markedly since the banking collapse in 2008.
In written accounts, Egilsstaðir is first mentioned in the 15th century as a place for legislative assembly. The nearby river, Eyvindará, is mentioned in Saga of the Sons of Droplaug and Saga of the inhabitants of Fljótsdalur.
Urbanisation in Egilsstaðir can be traced to Jón Bergsson (1855–1923), a farmer, who laid the groundwork for increased commerce and services at the Egilsstaðir farm by erecting a large residential building there at the start of the 20th century. The house is still in use as a hotel. Jón bought the farm Egilsstaðr at the close of the 19th century because of its location, when he predicted „Crossroads will be here“, which proved prescient.  Along with others, Jón Bergsson also took the initiative to establish a co-operative Kaupfélag Héraðsbúa (KHB) with headquarters there in 1909.   In subsequent years, bridges were built over Lagarfljót river og Eyvindará river and a road made over Fagridalur to Reyðarfjörður. Later, the regional headquarters for mail and telephone services were located at Egilsstaðir. 
In 1947 Egilsstaðir was incorporated as a town and a rural jurisdiction Egilsstaðahreppur, with neighboring jurisdictions Vallahreppur and Eiðahreppur contributing land to the new jurisdiction. The town soon grew and by 1980 the population exceeded 1000. In 1987, the status of the town was upgraded to (kaupstaður) and renamed Egilsstaðabær, or the city of Egilsstaðir. In early 2011, the number of inhabitants was 2.257 and had increased by 41 percent from the year 2001, when 1.600 were registered there. 
On 7. june 1998 Egilsstaðabær was united with Vallahreppur, Skriðdalshreppur, Eiðahreppur and Hjaltastaðarhreppur under the name Austur-Hérað. Austur-Hérað then became Fljótsdalshérað in the year 2004.
Points of interest
- Eiðar longwave transmitter
- Kárahnjúkar dam
- Hallormsstaðaskógur - the biggest forest in Iceland
- Hengifoss - a waterfall in Fljótsdalur
- Skriðuklaustur - the mansion of writer Gunnar Gunnarsson
- Öxi - mountain road between Egilsstaðir and Djúpivogur
- Sveinn Birkir Björnsson - editor of the Reykjavík Grapevine.
- Sigmar Vilhjálmsson - Iceland TV host.
- Hjálmar Jónsson - Iceland national team footballer.
- Vilhjálmur Einarsson, triple-jump athlete, silver medal winner at the 1956 Olympic games.
- Magnús Ver Magnússon, four times World's Strongest Man (1991, 1994, 1995 and 1996).
- Magni Ásgeirsson, singer, songwriter and musician, frontman for Icelandic pop band Á Móti Sól.
- Political division
- Mainly statistical division
- "Um sögu Egilsstaðabæjar" (in Icelandic). Retrieved 2011-05-30.
- "Pöntunarfjelag Fljótsdalshéraðs" (in Icelandic). Retrieved 2011-05-30.
- "Austur-Hérað" (in Icelandic). Retrieved 2011-05-30.
- "Austri, 17. janúar 1903, 13. árg., 2. tbl." (in Icelandic). Retrieved 2011-05-30.
- "Hagstofa Íslands, mannfjöldi" (in Icelandic). Retrieved 2011-05-30.