Abstract. We perform a multi-scale impact assessment of tephra fallout and dispersal from explosive volcanic activity in Iceland. A companion paper (Biass et al., 2014) introduces a multi-scale probabilistic assessment of tephra hazard from 4 Icelandic volcanoes (Hekla, Askja, Eyjafjallajökull and Katla) and presents probabilistic hazard maps for tephra accumulation in Iceland and tephra dispersal across Europe. Here, we present the subsequent vulnerability and impact assessment, that accounts the relevance of single features at national and European levels and considers several vulnerability indicators for tephra dispersal and deposition. At national scale, we focus on physical, systemic and economic vulnerability of Iceland to tephra fallout, whereas at European scale we focus on the systemic vulnerability of the air traffic system to tephra dispersal. Results include vulnerability maps for Iceland and European airspace and allow identifying the expected impacts of the different eruptive scenarios considered. Results at national scale show that tephra accumulation from the considered eruptive scenarios can disrupt main electricity network, in particular in case of eruption at Askja volcano. Results also show that if eruptive scenarios occurred at Hekla, Askja and Katla volcanoes, many power plants would be affected, causing a substantial systemic impact due to their importance for the Icelandic economy. Moreover, the considered scenarios at Askja and Katla could produce substantial impact on agricultural activities (crops and pastures). At European scale, tephra dispersal from explosive volcanic activity at Askja and Katla volcanoes is likely to produce substantial impacts at European level and, in particular, at Keflavik and London Flight Information Regions (FIRs), but also at FIRs above France, Germany and Scandinavia, in particular for long-lasting activity at Katla volcano. Explosive activity at Hekla volcano is likely to produce high impacts at Keflavik FIR and London FIRS, but in case of higher magnitude scenario, can impact also France FIRs. Results could support land use and emergency planning at national level and risk management strategies of the European air traffic system. Although we focus on Iceland, the proposed methodology could be applied to other active volcanic areas, enhancing the long-term tephra risk management.