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The area, which is more than 190 miles from the capital Reykjavik, has no permanent residents but sits within a national park popular with tourists.
Geologists have detected approximately 300 earthquakes this week, suggesting the volcano could be teetering on the edge of eruption.
The national civil protection agency in Iceland said the decision to evacuate more than 300 people close to Bardarbunga was a “precautionary” safety measure.
Meteorological offices in Iceland raised its assessment of the risk level to the aviation industry from yellow to orange earlier this week, taking the threat level to stage four of five.
This means there is an “escalating unrest with increased potential of eruption”.
The Bardarbunga volcanic system is located under the north-west region of Iceland’s Vatnajokull glacier.
Iceland’s Eyjafjallajokull volcano erupted in 2010, producing an ash cloud that severely disrupted air travel.
That eruption caused the largest closure of European airspace since World War Two, with losses estimated at between £1.3 billion and £2.2 billion.