The Chilean margin has been used as the model of an ocean-continent convergent system dominated by compression and active mountain building as a consequence of the strong mechanical coupling between the upper and the lower plates. The Andean Cordillera, however, shows evidence of alternating phases of compressional and extensional deformation. Volcano-sedimentary marine strata in the Aysén region of southern Chile contribute to an understanding of the causes of extensional tectonics and crustal thinning that occurred in the Andean orogeny because these deposits constitute the only reliable record of submarine suprasubduction volcanism during the Cenozoic in southern South America. In order to discern the age and tectono-sedimentary setting of these strata, referred to as the Traiguén Formation, we integrated sedimentology, ichnology, petrography, geochemistry, structural geology, foraminiferal micropaleontology, and U-Pb geochronology. Our results indicate that the Traiguén Formation was deposited in a deep-marine extensional basin during the late Oligocene–earliest Miocene. The geochemistry and petrography of the pillow basalts suggest that they formed in a convergent margin on a thinned crust rather than at an oceanic spreading center. We attribute the origin of the Traiguén Basin to a transient period of slab rollback and vigorous asthenospheric wedge circulation that was caused by an increase in trench-normal convergence rate at ca. 26–28 Ma and that resulted in a regional event of extension and widespread volcanism.