At one point in the 17th and 18th centuries, commercial vessels sailed between Ólafsvík and Denmark, and the village was one of the larger trading ports in Iceland.

Perhaps because of its situation on the bay of Breiðafjörður, the village was the first in Iceland to receive a commercial licence from the King of Denmark, in the 17th century.

Ólafsvík's economy is based on fishing industry and commerce, and provision of services for farmers in the area.

The area of Ólafsvík provides many opportunities for tourists, such as birdwatching, hiking trails, long sandy beaches, and snowmobiling on the Snæfellsjökull glacier, just 10 km away (although the road is closed for much of the year).

At nearby Hellissandur is the tallest structure in Western Europe, the Gufuskálar radio mast, 412 metres high.