The large aleatory variability associated with ground-motion prediction equations (GMPEs), which are used in probabilistic seismic hazard analysis (PSHA), have a great influence on the assessed intensity measures (IMs) particularly at long return periods. Therefore, efforts to reduce (even by only a few percent) the aleatory variability (measured for instance by standard deviation σ) associated with GMPEs are meritorious. A reduction of σ associated with GMPEs could eventually lead to a significant decrease in seismic demand estimates. Aleatory variability in earthquake ground motions in Iceland are separated here into source (inter-event), site (inter-site) and residual (intra-event and intra-site) effects by using various techniques that have been proposed in the literature over the past couple of decades, e.g. maximum likelihood regression, analysis of variance and two- way-fit plots. Better insight into the source of σ could be used to improve current GMPEs employed in the South Iceland Seismic Zone (SISZ). The study is carried out by exploiting the strong-motion datasets available from moderate earthquakes (Mw 5.0-6.5) that have occurred in the SISZ in the past decade.