Abstract: The South Iceland Seismic Zone (SISZ) is an E–W trending active transform zone with high seismicity. N–S trending right-lateral strike-slip faults accommodate the left-lateral transform motion. Using seismological data recorded from 1991 to 2007, we carried out stress inversion of focal mechanisms of 1340 earthquakes that affected the Skard and Leirubakki faults, eastern SISZ. Not only did the inversion show typical deviations of stress across the faults, it also revealed anticlockwise and clockwise rotations of stress axes with time. Numerical models of the Leirubakki Fault show that these rotations are consistent with the mechanical effect of a lowered friction coefficient during the post-seismic period relative to the pre-seismic period. The Skard Fault reveals a more complex behaviour associated with a higher post-seismic friction, resulting from a higher density of pre-existing fracturing and probable stress interaction between faults. Our results suggest that faults where micro-earthquakes occur during neighbouring major seismic events may undergo significant stress changes at the scale of several kilometres and on time-scales of several years.