Despite the ubiquity of tunnel channels and valleys within formerly glaciated areas, their origin remains enigmatic. Few modern analogues exist for event-related subglacial erosion. This paper presents evidence of subglacial meltwater erosion and tunnel channel formation during the November 1996 jökulhlaup, Skeiðarárjökull, Iceland. The jökulhlaup reached a peak discharge of 45 000 to 50 000 m3 s–1, with flood outbursts emanating from multiple outlets across the entire 23 km wide glacier snout. Subsequent retreat of the southeast margin of Skeiðarárjökull has revealed a tunnel channel excavated into the surrounding moraine sediment and ascending 11.5m over a distance of 160 m from a larger trough to join the apex of an ice-contact fan formed in November 1996. The tunnel channel formed via hydro-mechanical erosion of 14 000m3 to 24 000 m3 of unconsolidated glacier substrate, evidenced by copious rip-up clasts within the ice-contact fan. Flow reconstruction provides peak discharge estimates of 680±140m3 s–1. The tunnel channel orientation, oblique to local ice flow direction and within a col, suggests that local jökulhlaup routing was controlled by (a) subglacial topography and (b) the presence of a nearby proglacial lake. We describe the first modern example of tunnel channel formation and illustrate the importance of pressurized subglacial jökulhlaup flow for tunnel channel formation.