The interpretation of uppermost crustal deformation near oceanic transform faults is based on bathymetric lineaments and earthquake focal mechanisms, and relatively little is known about the detailed kinematics within the transform tectonized zone. The Tjörnes Fracture Zone is a broad zone of deformation produced by right‐lateral transform shearing in north Iceland and is partly exposed on land providing the opportunity to study shallow‐level crustal structure of mid‐Miocene, thick, oceanic‐like crust formed by subaerial spreading. A pronounced structural curvature of lava and dike orientations near the Húsavík‐Flatey Fault within the transform zone is well documented, yet of controversial origin. In order to develop an assessment of deformation near the transform zone, samples of lavas and dikes were collected from 182 paleomagnetic sites within eight structural localities across the deformation zone on the Flateyjarskagi Peninsula. A progressive clockwise increase in locality mean remanence declinations over more than 10 km south of the fault broadly mimics the structural curvature of lava and dike orientations. Rotation estimates based on inclined rotation axes indicate significant clockwise rotation (74° ± 7° to 96° ± 9°) of multiple crustal blocks. When combined, all data from 108 sites within the deformed zone <12 km to the Húsavík‐Flatey Fault yield a best fit inclined axis rotation of 55° ± 7°. The paleomagnetic data and field relationships are consistent with a modified bookshelf faulting model, with relatively small (~1 km across) independently rotated crustal blocks with variable, and in some cases large‐magnitude rotations found within 10 km to the transform fault zone. Similar crustal deformation and comparable amounts of rotation may be present near other oceanic transforms, where accessibility and surficial deposits may limit documentation of more complex fault structures.