Apart from space heating, one of Iceland's oldest and most important usages of geothermal energy is for heating greenhouses. For years, naturally warm soil has been used for growing potatoes and other vegetables. Heating greenhouses using geothermal energy began in Iceland in 1924. The majority of Iceland's greenhouses are located in the south, and most are enclosed in glass. It is common to use inert growing media (volcanic scoria, rhyolite) on concrete floors with individual plant watering. Geothermal steam is commonly used to boil and disinfect the soil. The increasing use of electric lighting in recent years has extended the growing season and improved greenhouse utilization. This development has been encouraged through governmental subsidies spent on electricity for lighting. CO2 enrichment in greenhouses is also common, primarily though CO2 produced in the geothermal plant at Hædarendi.

Greenhouse production is divided between different types of vegetables (tomatoes, cucumbers, paprika, etc.) and flowers for the domestic market (roses, potted plants, etc.). TheGreenhouses total area under glass increased by 1.9% per year between 1990 and 2000. It was about 194,000 m2 in 2007 with plastic tunnels for bedding- and forest plants included. Of this area, 50% is used for growing vegetables and strawberries, 26% for cutflowers and potplants and 24% are nurseries for bedding- and forest plants. The total surface area of greenhouses has decreased despite of an increase in total production. This is due to increased use of artificial lighting and CO2 in the greenhouse sector. Outdoor growing at several locations is enhanced by soil heating though geothermal water, especially during early spring. Soil heating enables growers to thaw the soil so vegetables can be brought to market sooner. It is estimated that about 120,000 m2 of fields are heated this way. Soil heating is not a growing application, partly because similar results are commonly obtained at a lower cost by covering the plants with plastic sheets. The total geothermal energy used in Iceland's greenhouse sector is estimated to be 740 TJ per year and because of the increased use of artificial light it has decreased as the lights give also heat.