Underlying the midslope Valparaiso Terrace, the Valparaiso Basin constitutes a unique and prominent deepwater forearc basin on the central Chile margin. The basin contains a 3–3.5 km thick sediment fill of late Cenozoic age. The seismic‐stratigraphic architecture of the Valparaiso Basin fill shows that margin‐wide subsidence above the underthrusting Juan Fernández Ridge, an aseismic volcanic swell crested with seamounts on the Nazca plate, characterized the basin evolution. Contemporaneously with margin subsidence and seaward rotation of the upper slope and shelf, the outer part of the forearc was deformed by thrust faulting above the leading flank of underthrusting seamounts that rotated the middle slope to a more horizontal attitude and formed seaward‐vergent outer forearc highs. Subsidence of the margin above the underthrusting Juan Fernández Ridge is ascribed to processes of subduction erosion, enhanced by factors related to subduction of the ridge, that caused dismemberment of upper plate material along the shallow aseismic part of the plate interface and transfer of material to the downgoing Nazca plate. Accelerated midslope subsidence, 55–75 km landward of the trench, coincides with the seaward limit of interplate seismicity, suggesting that enhanced basal erosion is related to the transition from aseismic to stick slip subduction behavior. Since subduction of the Juan Fernández Ridge began near 33°S ∼10 Ma ago, the Chile Trench north of 33°S is inferred to have retreated ∼3 km/Myr, and the midslope Valparaiso Basin subsided ∼0.3–0.5 km/Myr, approximating analogous Neogene rates for the Peruvian margin.