The Cordón Caulle geothermal region (40.5°S) is a 13 km × 6 km, NW-SE elongate, volcano-tectonic depression hosting numerous monogenetic volcanic centers, fumaroles, and hot-springs, most of which occur spatially associated with the edges of the depression. Volcanism started at approximately 0.3 Ma, with dominantly mafic effusions, and expressed ultimately in post-glacial and historic dacite–rhyolite eruptions (1921–1922 and 1960). Three NE-trending gravimetric profiles were carried out across the depression of Cordón Caulle, yielding a residual negative anomaly with the greatest amplitude (− 20 mGal) at the center of the depression. A 2D-gravity model given by a 490 m thick shallow body with a density contrast = − 650 kg/m 3, interpreted as a shallow package of dacite–rhyolite lavas and tephra, was found to match the residual anomaly. A dense rock equivalent volume of felsic material on the order of 28 km 3 (25% of the total output of Cordón Caulle) is derived from this thickness. Previous workers explain the origin of felsic rocks at Cordón Caulle in terms of the orientation of the borders of Cordón Caulle relative to the maximum stress direction σ 1 (i.e. NE-trending) prevailing during the Quaternary, according to which NW-trending domains were compressional, favoring stagnation, storage and differentiation of magmas. The dominantly monogenetic style of volcanism, the plateau-like morphology and the negative Bouguer anomaly, on the contrary, are interpreted as an indication of extensional tectonics. Intra-arc extension is proposed to be related to coseismic or postseismic stress relaxation accompanying major thrust events, such as the great 1960 Chilean earthquake, which is consistent, at Cordón Caulle, with the direction of propagation of dikes of the 1960 eruption (i.e. coseismic extension) and present-day subsidence inferred from InSAR data (i.e. postseismic extension). Prior to the Quaternary (8.2–1.6 Ma), nearly east-west compression prevailed at the intra-arc zone. A 5.44 ± 0.04 Ma old granodiorite intrusion bracketed by two sub-parallel branches of the regional, margin-parallel Liquiñe–Ofqui Fault Zone (LOFZ) in a prominent pop-up structure, 15 km to the east of Cordón Caulle, accounts for reverse reactivation of the LOFZ and rapid fault-related exhumation of basement rocks (> 1 mm/year). We argue that under compression, reverse reactivation of the LOFZ was facilitated by the combined effect of cyclic increase in fluid pressure induced by magmatic–hydrothermal input, and removal of lithostatic load induced by glacial erosion (> 1.5 mm/year in the vicinity of Cordón Caulle).