The decision to build the zoo in Laugardalur Valley was taken by the Reykjavík City Council on 22 April, 1986. The goal with its establishment was to educate the general public on Icelandic farm animals, give them a closer look at Icelandic farming practices, and strengthen the bond between people and animals. Construction of the zoo began in 1989.
Within one year, six structures for animal keeping were built, a seal pond was dug, areas for foxes, minks and reindeer formed and a goat enclosure set up. In addition to that, the workshop Hafrafell, which painter Örlygur Sigurson owned, was converted into an office and lecture hall. Plans were put in place to keep more than 20 species while letting the animals that live in Iceland have the spotlight, including farm animals and those found in the wild. There are few animals of each type.
Efforts are made to display their variatiations, colors, both sexes and their offspring. The zoo was opened by then mayor Davíð Oddson on 19 May, 1990.