A 3 day exercise simulating unrest and a large explosive eruption at Katla volcano, Iceland, was conducted in January 2016. A large volume of simulated data based on a complex, but realistic eruption scenario was compiled in advance and then transmitted to exercise participants in near-real time over the course of the exercise. The scenario was designed to test the expertise and procedures of the local institutions in charge of warning and responding to volcanic hazards, namely the volcano observatory, national civil protection, and the local university-science sector, as well as their interactions with the European science community and the London Volcanic Ash Advisory Centre. This exercise was the first of this magnitude and scope in Iceland and has revealed many successful developments introduced since the 2010 Eyjafjallajökull and 2011 Grímsvötn eruptions. Following the exercise, 90% of participants said that they felt better prepared for a future eruption. As with any exercise, it also identified areas where further development is required and improvements can be made to procedures. Seven key recommendations are made to further develop capability and enhance the collaboration between the volcano observatory, volcano research institutions and civil protection authorities. These recommendations cover topics including notification of responders, authoritative messaging, data sharing and media interaction, and are more broadly applicable to volcanic institutions elsewhere. Lessons and suggestions for how to run a large-scale volcanic exercise are given and could be adopted by those planning to rehearse their own response procedures.