Oxygen isotope ratios of hydrothermally altered basalts from depth of up to ~3 km are reported from three localities in Iceland: International Research Drilling Project (IRDP) core at Reydarfjordur, eastern Iceland (Tertiary age); drill cuttings from Reykjavik (Plio-Pleistocene age); and Halocene drill cuttings from the active Krafla central volcano. Whole rock samples from these three localities have Δ18O values averaging +3.9¿1.3, +2.4¿1.1, and -7.7¿2.4%, respectively. The observed values in the deeper samples from Krafla are as low as the values for any rocks previously reported. There seems to be a slight negative gradient in Δ18O with depth at the former two localities and a more pronounced one at Krafla. Oxygen isotope fractionations between epidote and quartz and those between calcite and fluid suggests that the basalts were altered at temperatures of 300¿--400¿C. Low ΔD and Δ18O of epidote and low Δ34S of anhydrite indicate that the altering fluids in all three areas originated as meteoric waters and have undergone varied 'oxygen shifts'. Differences in the 18O shift of the fluids are attributed to differences in hydrothermal systems; low water/rock ratios (≤0.1) are found in the IRDP core and the Reykjavik hole, but high water/rock ratios (>5) at Krafla. The convective hydrothermal activity, which is probably driven by silicic magma beneath the central volcanoes, has caused strong subsolidus depletion of 18O in the rocks. The primary-magnetic Δ18O value of the rocks in the Tertiary IRDP core was about +3.9%, which is lower than that obtained for fresh basalt from other places. Such exceptionally low Δ18O magmas are common in Iceland and may occur as the result of oxygen isotope exchange with or assimilation of altered rocks that form a thick sequence beneath the island due to isostatic subsidence.