The 2001 Nisqually earthquake occurred within the subducting Juan de Fuca plate. Previous seismic and geodetic studies could not confidently identify its actual fault plane from the two nodal planes. In this study, we apply the recently developed source-scanning algorithm to local seismic waveforms and show unambiguously that the steeply east-dipping plane is the rupture plane. The rupture began near the bottom of the subducting crust and propagated downward into the subducting uppermost mantle. If intraslab earthquakes are assumed to be due to dehydration embrittlement, the source dimension is unlikely to grow any larger because the warm thermal state of the subducting Juan de Fuca plate limits dehydration to a shallow depth below the slab surface. Numerical modeling of the thermal structure indicates that dehydration embrittlement can only take place in the top 10 km of the subducting mantle, implying that the maximum size of an intraslab earthquake in northern Cascadia would be Mw∼7 or less.