This is the latest step in a pilot project conceived by Icelandic New Energy, a company backed by the government, academics and private firms, that aims to have up to 40 hydrogen cars on the roads of the capital by the end of 2009.

"The future prospects for hydrogen are very bright," Jon Bjorn Skulason, general manager of Icelandic New Energy, told Reuters in an interview. "There is no other fuel in the world that fills the demands that fossil fuel fills today."

Iceland, rich in geothermal and hydroelectric power sources that allow hydrogen to be produced without pollution, aims to become independent of fossil fuels by mid-century.

The filling station opened in 2003 but initially only served the three hydrogen buses involved in a separate pilot.

Now it will be available to power 10 new Toyota (7203.T: Quote, Profile, Research) Prius hydrogen cars that VISTORKA, a shareholder in Icelandic New Energy, delivered to three Icelandic companies on Wednesday.

Three of those 10 went to Hertz (HTZ.N: Quote, Profile, Research) car rental, which will offer tourists to Reykjavik the chance to rent and drive hydrogen cars for the first time.

VISTORKA is owned by a consortium of Icelandic corporations. (Reporting by Kristin Arna Bragadottir, editing by Anthony Barker)