The volcanic and geothermal areas of Iceland are rich sources of non-double-couple (non-DC) earthquakes. A state-of-the-art digital seismometer network deployed at the Hengill–Grensdalur volcanic complex in 1991 recorded 4000 small earthquakes. We used the best recorded of these to determine 3-D V_P and V_P /V_S structure tomographically and accurate earthquake moment tensors. The V_P field is dominated by high seismic wave speed bodies interpreted as solidified intrusions. A widespread negative (−4 per cent) V_P /V_S anomaly in the upper 4km correlates with the geothermal field, but is too strong to be caused solely by the effect of temperature upon liquid water or the presence of vapour, and requires in addition mineralogical or lithological differences between the geothermal reservoir and its surroundings. These may be caused by geothermal alteration. Well-constrained moment tensors were obtained for 70 of the best-recorded events by applying linear programming methods to P- and S-wave polarities and amplitude ratios. About 25 per cent of the mechanisms are, within observational error, consistent with DC mechanisms consistent with shear faulting. The other 75 per cent have significantly non-DC mechanisms. Many have substantial explosive components, one has a substantial implosive component, and the deviatoric component of many is strongly non-DC. Many of the non-DC mechanisms are consistent, within observational error, with simultaneous tensile and shear faulting. However, the mechanisms occupy a continuum in source-type parameter space and probably at least one additional source process is occurring. This may be fluid flow into newly formed cracks, causing partial compensation of the volumetric component. Studying non-shear earthquakes such as these has great potential for improving our understanding of geothermal processes and earthquake source processes in general.