The present paper reviews Tertiary volcanic and sedimentary formations in the Inter-Andean region of southern Ecuador (between 2°S and 4°20′S) in order to develop a geodynamic model of the region. The formations occur in the southern shallow prolongation of the Inter-Andean Valley between the Cordillera Real to the east, and the Cordillera Occidental and Amotape–Tahuı́n Provinces to the west. One hundred fifty zircon fission-track analyses has established a detailed chronostratigraphy for the sedimentary and volcanic formations and several small intrusions. The Paleogene to early Miocene formations are dominated by intermediate and acidic volcanic and pyroclastic rocks. In addition, relics of Eocene continental sedimentary series have been identified. The Neogene sedimentary series lie unconformably on deformed and eroded metamorphic, sedimentary and volcanic formations. They were deposited in two stages, which are separated by a major unconformity dated at ≈10–9 Ma. (1) During the middle and early late Miocene (≈15–10 Ma) marginal marine deltaic, lagoonal, lacustrine and fluvial environments prevailed, which we group under the heading “Pacific Coastal sequences”. They presumably covered a greater surface area in southern Ecuador than their present occurrence in small topographic depressions. We suggest that they were deposited in the shallow marine Cuenca and Loja Embayments. Deposition in a marginal marine environment is also supported by the occurrence of brackish water ostracods and other fauna. (2) Above the regional (angular) unconformity, the coastal facies are overlain by late Miocene (≈9–5 Ma) continental alluvial fan and fluvial facies which are in turn covered by mainly airborne volcanic material. They represent the “Intermontane sequences” of the basins of Cuenca, Girón–Santa Isabel, Nabón, Loja and Malacatos–Vilcabamba. Sedimentologic and stratigraphic results are used to discuss the tectonic setting of Neogene sedimentation in the forearc and arc domain of the Ecuadorian subduction system. During the Pacific Coastal stage, northward displacement of the coastal forearc block along the Calacali–Pallatanga fault zone has driven crustal collapse in the Inter-Andean region. As a result, extensional subsidence drove the eastward ingression of shallow seas into the Cuenca and Loja Embayments from the Manabı́ and Progreso Basins to the west. Tectonic inversion in the forearc area during the early late Miocene (at ≈9.5 Ma) reflects the initiation of W–E oriented compression and uplift in the Inter-Andean region and the establishment of smaller Intermontane stage basins, which host the continental sequences. Coeval topographic rise of the Cordillera Occidental is indicated by the onset of clastic input from the west. The small Intermontane Basin of Nabón (≈8.5–7.9 Ma) formed during the period of maximum compression. The present data prove that the Neogene Andean forearc and arc area in southern Ecuador was a site of important but variable tectonic activity, which was presumably driven by the collision and coupling of the Carnegie Ridge with the Ecuadorian margin since ≈15–9 Ma.