The Folk Museum at Skógar preserves the cultural heritage of the Rangárvallasýsla and Vestur-Skaftafellssýsla region, in the form of tools and equipment used at land and sea, crafts, old buildings, books, manuscripts and documents. Collection of items began in 1945, and on 1 December 1949 the museum was first opened, in a small basement room of the Skógar School. The foundation of the collection took place at the turning point in the history of the Icelandic nation: the old rural society was vanishing, farmers were about to give up their fishing by small open boats, a new culture was taking root. The collection drive was well-received in its catchment area. The museum moved into its own premises in 1955.
In 1968 work commenced on the reconstruction of old turf farmhouses, which has been one of the principal parts of the museum's work. In these buildings, visitors to the museum can see how the people of Iceland lived in past times. One of the high points of this reconstruction work was the rebuilding of a farmhouse of the fjósbaðstofa type, once typical of the southeast, where the household's living accommodation was built above the cowshed. The peak of the museum's work in this field was the construction of Skógar Church, using remnants of older churches, in the style which predominated in Iceland from the Middle Ages until the 19th century.

Skógar Folk Museum stands at a turning point in the year 2000. Efforts are being made to be able to build a large exhibition and storage facility at the museum site to house exhibits from the technological age that began in Iceland shortly before the mid-20th century: this planned Technology and Transport collection is at the top of the museum's agenda at the dawn of the new century.