Gissur was at this time engaged in making amends and settling his quarrels with the Sturlungar clan. Not all the followers of the Sturlungar were ready to forgive and forget. On 22 October 1253, Eyjólfur ofsi Þorsteinsson and his followers put Flugumýri to the torch and clashed with Gissur and his men. Eyjólfur was seeking vengeance for his expulsion from Skagafjörður and for the death of his father-in-law Sturla Sighvatsson who had died in the Battle of Örlygsstaðir at the hands of Gissur and his men. 25 people died in the ensuing fire and conflict, including Gissur's wife Gróa and their sons. Gissur himself escaped death and wrought vengeance on those involved, but Eyjólfur, the leader of the attackers, escaped him. Eyjólfur would later fall in the Battle of Þverá on 15 May 1255.
The Flugumýri Arson lived for a long time in folk tales, and some scholars believe that it was inspired by the arson in Njáls saga (or vice versa).