In August 1996, a period of elevated seismicity commenced beneath Iliamna Volcano, Alaska. This activity lasted until early 1997, consisted of over 3000 earthquakes, and was accompanied by elevated emissions of volcanic gases. No eruption occurred and seismicity returned to background levels where it has remained since. We use waveform alignment with bispectrum-verified cross-correlation and double-difference methods to relocate over 2000 earthquakes from 1996 to 2005 with high precision (~ 100 m). The results of this analysis greatly clarify the distribution of seismic activity, revealing distinct features previously hidden by location scatter. A set of linear earthquake clusters diverges upward and southward from the main group of earthquakes. The events in these linear clusters show a clear southward migration with time. We suggest that these earthquakes represent either a response to degassing of the magma body, circulation of fluids due to exsolution from magma or heating of ground water, or possibly the intrusion of new dikes beneath Iliamna's southern flank. In addition, we speculate that the deeper, somewhat diffuse cluster of seismicity near and south of Iliamna's summit indicates the presence of an underlying magma body between about 2 and 4 km depth below sea level, based on similar features found previously at several other Alaskan volcanoes.