Abstract Interactions among faulting, earthquakes, and eruptions are fundamental to plate tectonics and hazard forecasting yet rarely observed along mid‐ocean ridges. On Iceland’s Reykjanes Peninsula, seismotectonic–volcanic unrest resumed after nearly 800‐year hiatus, providing an opportunity to observe these interactions during 2021–2025 activity. By integrating high‐resolution seismicity, focal mechanisms, satellite geodesy, surface deformation, and eruption data, we document ∼4 m of total extension accommodated through 14 rifting episodes. The largest, in 2023, involved graben reactivation and diking, with seismic swarms and earthquake faulting that matched the surface ruptures, where strike‐slip faulting preceded normal‐faulting earthquakes and extension. The accrued extension was released by extension fractures triggered by magma accumulation. Long‐term observations show no correlation between erupted magma volume, seismicity, and crustal extension. This highlights dynamic relation between rifting, faulting, and magmatism in transtensional settings and their implications for hazard assessment.