Panarea is the smallest of the seven inhabited Aeolian Islands, a volcanic island chain in north of Sicily, southern Italy. It is a frazione of the comune of Lipari. There are currently about 280 residents living on the island year-round; however the population increases dramatically in summer with the influx of tourists especially during the months of July and August. In r…Panarea is the smallest of the seven inhabited Aeolian Islands, a volcanic island chain in north of Sicily, southern Italy. It is a frazione of the comune of Lipari. There are currently about 280 residents living on the island year-round; however the population increases dramatically in summer with the influx of tourists especially during the months of July and August. In recent years, the island has become known internationally for its celebrity visitors.