Description: An active seafloor hydrothermal system subjects the background sediments of the Grimsey Graben (Tjörnes Fracture Zone) to alteration that produces dissolution of the primary volcaniclastic matrix and replacement/precipitation of sulfides, sulfates, oxides, oxyhydroxides, carbonates and phyllosilicates. Three types of hydrothermal alteration of the sediment are defined on the basis of the dominant hydrothermal phyllosilicate formed: smectite, kaolinite, chlorite. The most common alteration is near‐total conversion of the volcaniclastic material to smectite (95–116°C). The dominant smectite in the deepest sediments sampled is beidellite, which is replaced by montmorillonite and an intimate mixture of di‐ and tri‐octahedral smectite up core. This gradual vertical change in smectite composition suggests an increase in the Mg supply upward, the result of sediment alteration by the ascending hydrothermal fluids mixing with descending seawater. The vertical sequence kaolinite → kaolinite‐smectite mixed‐layer → smectite from bottom to top of a core, as well as the distinct zonation across the veins (kaolinite in the central zone → kaolinite‐smectite in the rim), suggests hydrothermal transformation of the initially formed smectite to kaolinite through kaolinite‐smectite mixed‐layer (150–160°C). The cause of this transformation might have been an evolution of the fluids toward a slightly acidic pH or a relative increase in the Al concentration. Minor amounts of chamosite fill thin veins in the deepest sections of some cores. The gradual change from background clinochlore to chamosite across the veins suggests that chamosite replaces clinochlore as Fe is made available from hydrothermal dissolution of detrital Fe‐containing minerals. The internal textures, REE distribution patterns and the mode of occurrence of another magnesian phyllosilicate, kerolite, suggest that this mineral is the primary precipitate in the hydrothermal chimneys rather than an alteration product in the sediment. Kerolite precipitated after and grew on anhydrite in the chimneys. Oxygen isotope ratios are interpreted to reflect precipitation of kerolite at temperatures of 302° to 336°C. It accumulated in the hydrothermal mounds following the collapse of the chimneys and subsequent dissolution of anhydrite, thereby forming highly permeable aquifer layers underlying the vent field. Some kerolite was redeposited in the near vent field sediments by turbidity flows. The altered sediments are depleted in Mn, Rb and Sr, and enriched in U, Mo, Pb, Ba, As, Bi, Sb, Ag, Tl and Ga, as a result of leaching and precipitation, respectively. Conservative elements (Ti, Zr, Hf, Sc, Cr, Nb and Sn) are depleted or enriched in the altered sediments because of passive (precipitation or leaching of other phases) rather than active (because of their mobility) processes.