Seven years of subsurface current observations at deep-sea and continental slope moorings off Chile (30¿S), satellite sea surface anomaly, and satellite wind stress are used to examine space, time, and propagation characteristics of the mesoscale eddy activity in the coastal transition zone off Chile. This zone off Chile extends from the coast to ~600--800 km offshore and can be separated into two latitudinal regions. The first region, between 29¿ and 39¿S off central Chile, is characterized by high eddy kinetic energy and strong but variable equatorward wind stress. The second region, between 19¿ and 29¿S off northern Chile, is characterized by low eddy kinetic energy and weak but persistent equatorward wind stress. Low-frequency mesoscale variability off central Chile is mainly associated with baroclinic instability of coastal currents and westward propagation of Rossby waves from the eastern boundary and is strongly modulated over El Ni¿o/La Ni¿a cycles. Application of a new rotary wavelet spectrum method to the recording current meter data and the use of current estimates from satellite altimeter data show that mesoscale eddies and meanders in the coastal transition zone fluctuate with periods centered on 120 days and with length scales centered on ~200 km. Cross-rotary wavelet analyses of currents and wind stress indicate that fluctuations of coastal currents with periods longer than 220 days propagated westward as free Rossby waves during 1995--1996 and as forced Rossby waves during 1999--2001.