Although the tendency of Atlantic salmon Salmo salar to form differentiated populations among rivers and among tributaries within large river systems (>100 km-long) is well documented, much less is known about population structure within small river systems (<30 km-long). In the present study, we investigated the genetic effects of straying of hatchery-reared salmon on population structure and genetic composition within the Ellidaár river system, a small system (21 km total length) in SW Iceland. We analyzed spatial and temporal variation of wild and domesticated samples (farmed and ranched; n = 931) using seven microsatellite loci. Estimates of population differentiation [FST, genetic tree (DA)] and Bayesian cluster analysis (STRUCTURE) revealed a significant population structure as well as relative long-term temporal stability of the genetic composition in the main river from 1948 to 2005. However, the genetic composition of the tributary populations was unstable and genetically homogenized in recent years. Wild-hatchery hybrids were detected during the influx of strays as well as few years after, suggesting that introgression has changed the genetic composition of the wild populations. More investigations are needed in Iceland and elsewhere on possible fine-scale population differentiation and factors leading to it. Fine-scale population differentiation as observed in the present study has implications for the resolution with which harvest and habitat management of salmon should be conducted. In addition, farming and ranching operations should be located to minimize potential negative effects of strays on wild fish.