Abstract The magnetite deposits at El Laco, Chile, have been widely cited as the type example of an iron deposit formed from direct consolidation of a magma. This study presents field, petrographic, and rare earth element (REE) evidence that shows that magnetite deposition was largely the result of hydrothermal activity. Hydrothermal activity at El Laco is clearly manifested in alteration assemblages observed in host-rock andesite: magnetite occurs in association with a series of hydrothermal alteration assemblages. The earliest-formed alteration assemblages include weak propylitic (chlorite-sericite-clay), sodic-potassic mineral phases (scapolite-albite-K feldspar-sphene), and silicification by cation leaching. Alteration of andesite to calcium-rich pyroxene (diopside) ± magnetite followed. Bulk iron-oxide mineralization then occurred, producing an assemblage of magnetite ± apatite ± quartz ± calcite. The final stages of hydrothermal alteration of andesite included argillic alteration (kaolinite-sericite-alunite), silicification associated with anhydrite, and retrograde alteration (sericite-clinozoisite-talc-illite/smectite-biotite) of sodic and calcic alteration phases. Oxidation of magnetite to hematite (±jarosite ± goethite) postdated magnetite emplacement. Textural evidence also supports the interpretation of a metasomatic-hydrothermal origin: 1. Abundant layers of magnetite mimic the morphology of andesite flow layers, suggesting direct replacement of andesite by magnetite. 2. Porous textures in magnetite resemble andesite breccia fragments that were partially or completely replaced by magnetite. These textures are associated with bladed diopside and pyroxene casts, confirming that, prior to iron mineralization, andesite experienced calcic alteration. Porous regions in magnetite that occur on a larger scale than typical breccia fragments (>10 cm) indicate direct replacement of unbrecciated andesite. 3. Microscopy shows direct replacement of diopside by both magnetite and apatite. 4. Abundant hydrothermal magnetite textures include coarse-grained magnetite octahedra encrustations, magnetite veins occurring with drusy quartz, brecciation, geyserlike magnetite terraces, and fumarole-like tube structures. 5. Magnetite veins crosscut diopside-rich altered breccia fragments, indicating that hydraulic fracturing of footwall andesite was followed by hydrothermal precipitation of magnetite. REE patterns of magnetite and andesite alteration assemblages show negative Eu anomalies during early alteration (diopside and scapolite) and magnetite-apatite phases, and positive Eu anomalies in later alteration. This likely reflects a change in oxidation state from Eu 2 + to Eu3+ as the system developed. REE concentrations in magnetite are the same as REE concentrations in unaltered country rocks, suggesting that the total REE content of magnetite was inherited from precursor andesite during replacement processes. These results are most consistent with the interpretation that magnetite-apatite formation represents a hydrothermal-alteration event, in which iron- or phosphorous-rich fluids reacted with and replaced host-rock andesite and formed by hydrothermal open-space filling. Silica that was removed during replacement was later deposited as quartz veins and as siliceous alteration associated with argillic and sulfate deposition.