Feature of peacock, especially in small island (7)
I believe the answer is:
eyespot
'feature of peacock' is the definition.
(feature of a peacock's tail)
'especially in small island' is the wordplay.
'especially' becomes 'esp' (common abbreviation).
'in' means one lot of letters goes inside another.
'small island' becomes 'eyot' (I've seen this before).
'esp' put within 'eyot' is 'EYESPOT'.
(Other definitions for eyespot that I've seen before include "Plant disease" , "Cereal fungal disease" , "on a butterfly's wing" , "Evidence of disease" , "Light-sensitive patch on a starfish and others" .)