A small island north of American continent (4)
I believe the answer is:
asia
'continent' is the definition.
(Asia is an example)
'a small island north of american' is the wordplay.
'small island' becomes 'is' (abbreviation; 'small' suggests an abbreviation).
'north of' shows that the letters should be reversed in order (I've seen 'north' mean this (in a down clue, letters go up or 'northward')).
'american' becomes 'a' (common abbreviation - e.g. in organisation names).
'is' reversed gives 'si'.
'a'+'si'+'a'='ASIA'
(Other definitions for asia that I've seen before include "Huge landmass" , "Great continent" , "group of countries" , "Thailand and its location" , "Large continent" .)