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Chilean dryland areas of the Mediterranean climate region are characterized by highly degraded and compacted soils, which require the use of conservation tillage systems to mitigate water erosion as well as to improve soil water storage. An oat (Avena sativa L. cv. Supernova-INIA) -wheat (Triticum aestivum L. cv. Pandora-INIA) crop rotation was established under the following conservation systems: no tillage (Nt), Nt + contour plowing (Nt+Cp), Nt + barrier hedge (Nt+Bh), and Nt + subsoiling (Nt+Sb), compared to conventional tillage (Ct) to evaluate their influence on soil water content (SWC) in the profile (10 to 110 cm depth), the soil compaction and their interaction with the crop yield. Experimental plots were established in 2007 and lasted 3 yr till 2009 in a compacted Alfisol. At the end of the growing seasons, SWC was reduced by 44 to 51% in conservation tillage systems and 60% in Ct. Soil water content had a significant (p < 0.05) interaction with tillage system and depth; Nt+Sb showed lower SWC between 10 to 30 cm, but higher and similar to the rest between 50 to 110 cm except for Ct. Although, SWC was higher in conservation tillage systems, the high values on soil compaction affected yield. No tillage + subsoiling reduced soil compaction and had a significant increment of grain yield (similar to Ct in seasons 2008 and 2009). These findings show us that the choice of conservation tillage in compacted soils of the Mediterranean region needs to improve soil structure to obtain higher yields and increment SWC.