The stock of capelin, Mallotus villosus (Müller), that inhabits the area between Iceland, East Greenland, and the island of Jan Mayen spawns in shallow coastal water south and west of Iceland. Juveniles grow up over the continental shelf off north Iceland and off East Greenland west of the Denmark Strait. The main feeding area of adults is the Iceland Sea, the oceanic area from about 68 to 72°N, between the Jan Mayen Ridge and the East Greenland continental shelf. After the feeding season, the adult stock assembles over the outer shelf off north Iceland and migrates to the spawning grounds along the south and west coasts from December to March. The main oceanographic features of Icelandic waters and the Iceland Sea are described and capelin migrations related to the distribution of water masses and the ocean current systems in the area. In the past two decades there have been large variations in capelin migrations and catchability, especially during the feeding season. However, these variations can only be explained in part by the available environmental data. Year-class abundance appears to be determined by survival during the first winter, in tune with the greater environmental variability off north Iceland than south and west of Iceland, where these capelin spawn and the larvae start drifting. Adult growth is positively related to the flow of Atlantic water into the area north of Iceland, indicating improved feeding conditions in the Iceland Sea when the Irminger Current is strong. There can be large interannual variations in number and weight-at-age in the adult stock. The main predators are whales, seabirds, and fish, especially cod. The combined annual removal by predators is estimated to have been 2.1–3.4 million tonnes in the early 1990s. The mean weight-at-age of cod aged 5–8 years dropped by up to 25–30% when capelin abundance was low in the early 1980s and 1990s. The relatively low mean weight of cod in the past 3 years may well be due to changed distribution and migration of capelin, resulting in reduced access of cod to this most important item in their diet.