The Nesjavellir high temperature geothermal field is a part of the Hengill geothermal area in SW-Iceland. The Nesjavellir field has been under exploration and development during the past 25 years. This paper summarizes the main exploration results, i.e. temperature and pressure distribution in the reservoir and the discharge parameters of the production wells. A conceptual model of the Nesjavellir field is described, along with a numerical simulation model. The calculation of the thermal power of district heating schemes in Iceland normally assumes cooling of the network fluid down to 40°C. The numerical model results indicate a power potential large enough to supply a 300 MW thermal power plant at Nesjavellir for 30 years without re-injection into the reservoir. Hitaveita Reykjavikur began the construction of the Nesjavellir geothermal co-generation power plant in 1987. The plant utilizes high pressure steam for electricity generation and low pressure steam and the separated water to heat fresh ground water for district heating in the Reykjavik area. The first stage, a 100 MW, thermal power plant, was commissioned in September 1990. The fully developed plant, using a re-injection system, is planned to deliver 400 MW, for district heating and 80–90 MWc for the national grid.