In 1993 and 1998 a 38-point GPS network was surveyed on the Reykjanes Peninsula, SW Iceland. According to the NUVEL-1A plate motion model the spreading rate of the North American and Eurasian plates in SW Iceland is 18.9¿0.5 mm/yr toward N102.7¿¿1.1 ¿E, highly oblique to the plate boundary. Instead of oblique spreading, the measurements indicate left-lateral shear strain accumulation parallel to the Reykjanes Peninsula seismic zone (~N76 ¿E) at the rate of about ϵ˙yx≈-0.2 μstrain/yr (tensor shear strain). Subsidence is generally observed toward the seismic zone. A local maximum subsidence of 60 mm was measured in the Svartsengi geothermal area. Subsidence in this area has previously been detected with geodetic measurements and is considered a result of geothermal usage. Expansion was observed in the area of the Hengill triple junction. This is probably a result of magma accumulation beneath! mount Hr¿mundartindur, as previous seismic and geodetic measurements have indicated. Using a simple screw dislocation model, we fit the majority of the data. Assuming a left-lateral shear zone at depth along the seismic zone, we estimate locking depth of ~6.5 km and deep slip rate of ~16.5 mm/yr. The maximum left-lateral displacement predicted by the screw dislocation model, 11.85¿0.06 mm/yr, is consistent with the observed value of 11.9¿0.5 mm/yr. If the Hengill area is excluded, little extension is observed across the peninsula. The discrepancy between the NUVEL-1A oblique spreading and the observed transcurrent motion is thought to be caused by lack of magma intrusion into the crust during this time period. ¿ 2001 American Geophysical Union