Erlendur worked as a research associate at the American Society for Psychical Research from 1972 to 1974. In 1973 he became a faculty member at the University of Iceland, where he advanced to Professor of Psychology in 1989. He retired from teaching in 1999. He has conducted surveys of religious and folk beliefs; for example in a survey of randomly selected Icelanders conducted in 1974–75 and published in 1977 and 1978, he established that an unusually high proportion believe in the paranormal, in particular in supernatural figures such as huldufólk and draugar, research built on in the 2000s by Terry Gunnell; in a 1978 survey he examined the prevalence of belief in Iceland in precognitive dreams; and in a study published in 1985 he found proportionally more reports of encounters with dead people from Iceland than any other European country. He has also contributed to the cross-cultural standardization of psychological testing instruments.