The battle is on to save the Icelandic town of Grindavik as lava torched three homes creating a “worst case scenario”.
A volcano on the Reykjanes peninsula erupted in the early hours of Sunday, spewing semi-molten rock towards the settlement in south-western Iceland for the second time in less than a month.
At least three homes have been set on fire in Grindavik as lava flowed into the town and the main road into the area has been cut off.
The eruption follows a series of earthquakes near the fishing town, the Icelandic Meteorological Office has said.
The village of 3,800 people near Iceland's main international airport was evacuated on November 10 when the earthquakes led to cracks and openings in the earth between the town and Sylingarfell, a small mountain to the north.
Residents were forced to leave their homes for six weeks following the earthquakes and the eventual volcanic eruption before returning home on December 22.
The nearby Blue Lagoon geothermal spa - one of Iceland's biggest tourist attractions - also closed temporarily.
Iceland in recent weeks sought to build barriers of earth and rock to prevent lava from reaching Grindavik, but the latest eruption appeared to have penetrated the defences.
No one has been killed in the eruptions, but a workman is missing after reportedly falling into a crack opened by the volcano.
Director of civil defence, Vidir Reynisson, said the “worst case scenario” had happened when a second fissure opened up inside defence barriers.
He told a briefing that barriers had been built north of Grindavik before an eruption in December.
The Icelandic Meteorological Office (IMO) said the barriers had been breached in some places, allowing lava to reach the town which then set houses and buildings on fire.
Pumps could now be used to cool lava with seawater to help limit the damage to the town.
Work also continues on the construction of a defensive wall at Nesvegur.
Úlfar Lúðvíksson, police chief in South Iceland, told Icelandic broadcaster RÚV that the defensive wall that was built had been very successful.
The President of Iceland Guðni Th. Jóhannesson has said “saving lives must remain the priority” following the eruption.
He said in an address: “What we all hoped would not happen has come to pass. It has come to pass that lava is flowing into Grindavík, a thriving town where people have built their lives, engaged in fishing and other occupations and created a community in harmony with God and one another.
“We continue to hope for as good an outcome as possible, in the face of these tremendous forces of nature.
“A few months ago the town was successfully evacuated after a frightening series of earthquakes. And now saving lives must remain the priority.”
Geophysicist Magnús Tumi Guðmundsson has said that the fissure closest to town and which claimed three homes, stopped erupting on Sunday night.
Iceland's civil protection agency on Sunday said it had raised its alert level to "emergency", the highest on a three-level scale, signalling an event had begun that could cause harm to people, communities, property or the environment.
Lying between the Eurasian and North American tectonic plates, two of the largest on the planet, Iceland is a seismic and volcanic hot spot as the two plates move in opposite directions.
In December, the country was on alert when it was feared that a fire caused by gas pollution could reach Reykjavik.
Iceland, which sits above a volcanic hot spot in the North Atlantic, averages an eruption every four to five years.
