Inside the Icehammer’s Vault public dungeon. Start at Kynesgrove Wayshrine and follow the road going southeast, until you reach a big stone circle on the ground. Look to the east (Gandalf™) and you will see the entrance to the dungeon (wooden doors in a cliff).
Once you are inside the dungeon, keep following the path to your left. It will take you to the room with the broken ceiling. Light from this hole shines onto the wooden platform close to the main prize. The skyshard is found on the ground floor, in the water, next to several wolves.
The entrance to the dungeon from the big stone circle.
Dungeon location on the world map.
Watch out for the wolves.
Location on the dungeon map.