The largest glacier outburst flood (j¿kulhlaup) ever recorded in Iceland occurred in 1996 and came from subglacial lake Gr¿msv¿tn in Vatnaj¿kull ice cap. Among other noteworthy features, this flood was characterized by an unprecedentedly high lake level prior to flood initiation, extremely rapid linear rise in lake discharge, delay between the onset of lake drainage and floodwater arrival at the glacier terminus, formation of short-lived supraglacial fountains, and initially unchannelized outbursts of floodwater at the terminus. Observations suggest that the 1996 flood propagation mechanism was fundamentally different than that of previously observed floods from Gr¿msv¿tn. We advance a new model whereby floodwater initially propagates in a turbulent subglacial sheet, which feeds a nascent system of conduits. This model is able to explain key observations made of the 1996 j¿kulhlaup and may shed light on other outburst floods that do not conform to the standard model.