The serpentine creature is said to live and often be sighted raising its back above the water in Lagarfljót, a freshwater, below-sea-level, glacial-fed lake which has very poor visibility as a result of siltation. It is described as longer than a football field, or 300 feet (91 m), and has also been reported outside the water, lying coiled up or slithering into the trees. Sometimes it is said to be as long as the lake itself, 30 kilometres (19 mi). It is a "many humps" type of lake monster, rather than the simply serpentine type of, for example, the Loch Ness Monster.
The Lagarfljót Worm has been sighted several times in modern times, including in 1963 by the head of the Icelandic National Forest Service, Sigurður Blöndal, and in 1998 by a teacher and students at Hallormsstaðir School. In 1983, contractors laying a telephone cable measured a large shifting mass near the eastern shore when performing preliminary depth measurements, and when they later retrieved the non-functional cable, found that it was broken where it had lain over the anomaly:
"This cable that was specially engineered so it wouldn’t kink was wound in several places and badly torn and damaged in 22 different places . . . . I believe we dragged the cable directly over the belly of the beast. Unless it was through its mouth."
In February 2012, the Icelandic national broadcaster, RÚV, published a video thought to show the Lagarfljót Worm swimming in snow-covered icy water, but it was later demonstrated to be making no progress and therefore probably an inanimate object moved by the rapid current.
A sightseeing boat named Lagarfljótsormurinn after it began operations on the lake in 1999, and the Gunnar GunnarssonInstitution in Skriðuklaustur seeks to preserve the traditions of the Lagarfljót Worm for cultural and tourism purposes.
According to the folk tradition recorded by Jón Árnason, the great serpent in Lagarfljót grew out of a small "lingworm" or heath-dragon; a girl was given a gold ring by her mother, and asked how she might best derive profit from the gold, was told to place it under a lingworm. She did so, and put it in the top of her linen chest for a few days, but then found that the little dragon had grown so large, it had broken open the chest. Frightened, she threw both it and the gold into the lake, where the serpent continued to grow and terrorized the countryside, spitting poison and killing people and animals. Two Finns called in to destroy it and retrieve the gold said that they had managed to tie its head and tail to the bottom of the lake but it was impossible to kill it because there was a still larger dragon underneath.
Gases rising from the lakebed create openings in the ice, blow debris from the lake bottom to the surface, and sometimes warp the atmosphere, creating optical illusions. Flotsam from the mountain sides and glaciers also collects in tangles that can look like some sort of monster. According to Helgi Hallgrímsson, an Icelandic biologist who has extensively studied the lake, both of these could explain some but not all of the sightings, while traditional legendary material could explain some of the stories.