Lago Laja is a late Quaternary volcanic-dammed lake located near the drainage divide of the south central Andes. Field observations, lake reflection seismic profiles, bathymetry, and remote sensing data reveal an active fault system that runs parallel to the volcanic arc along the axis of the Main Cordillera, the Lago Laja fault system (LLFS). Normal faults of this extensional system cut late Pleistocene volcanics, 2.7 mm/yr. Since 7.1 ka, the LLFS accounts for ~0.7% of arc-normal extension at an average minimum rate of 1.2 mm/yr and strain rate of ~10-14 s-1. Seismites and surface ruptures evidence M>6 paleoearthquakes. The Main Cordillera at ~37¿S is a large-scale pop-up structure uplifted by thrusting along its foothills. In this light, we interpret extension in the axial and highest part of the Andes as incipient synorogenic gravitational collapse in response to uplift and crustal thickening. Thermal weakening due to elevated heat flow and postglacial lithospheric rebound and unbending have probably contributed to the arc-limited collapse and Holocene acceleration of deformation rates. The lack of significant strike-slip offsets along the LLFS as well as along both foothills-thrust systems at 37¿S contrasts with the intra-arc dextral fault zone south of 38¿S. Regional structural data indicates that north of 38¿S, diffusely distributed strain reflects low partitioning of oblique subduction, while to the south deformation is localized in a discrete strike-slip fault zone along the volcanic arc, reflecting a higher degree of partitioning. We relate this strain partitioning gradient to favorable fault orientations in the fore arc north of the Arauco Peninsula, a major seismotectonic boundary.