Towards the end of the last glaciation, water from the Heilagsdalur valley carved out the Seljahjallagil gully. The northern slope of the gully consists of glacial deposits from the time of glacial retreat. It is wide at the mouth but terminates as a narrow and deep crevice, with walls composed of irregularly curved columnar basalt and cube jointed rock. These form the core of the subglacially formed ridge of Bláfjallsfjallgarður. A 4000 year old lava flow, which originated from the lava shield of Ketildyngja flowed down Seljahjallagil. It forms now the edge of a waterfall in the innermost part of the gully. The lava spread out in front of the ravine and surged over Lake Mývatn, blocking its outlet and causing the water level to rise. It then proceeded to flow down the Laxárdalur valley and over large parts of the Aðaldalur valley and is called "Older Laxá Lava" by geologists. The southernmost crater of the Lúdentarborgir crater row is found on the bottom of Seljahjallagil.