Most of the deformation associated with the seismic cycle in subduction zones occurs offshore and has been therefore difficult to quantify with direct observations at millennial timescales. Here we study millennial deformation associated with an active splay‐fault system in the Arauco Bay area off south central Chile. We describe hitherto unrecognized drowned shorelines using high‐resolution multibeam bathymetry, geomorphic, sedimentologic, and paleontologic observations and quantify uplift rates using a Landscape Evolution Model. Along a margin‐normal profile, uplift rates are 1.3 m/ka near the edge of the continental shelf, 1.5 m/ka at the emerged Santa María Island, −0.1 m/ka at the center of the Arauco Bay, and 0.3 m/ka in the mainland. The bathymetry images a complex pattern of folds and faults representing the surface expression of the crustal‐scale Santa María splay‐fault system. We modeled surface deformation using two different structural scenarios: deep‐reaching normal faults and deep‐reaching reverse faults with shallow extensional structures. Our preferred model comprises a blind reverse fault extending from 3 km depth down to the plate interface at 16 km that slips at a rate between 3.0 and 3.7 m/ka. If all the splay‐fault slip occurs during every great megathrust earthquake, with a recurrence of ~150–200 years, the fault would slip ~0.5 m per event, equivalent to a magnitude ~6.4 earthquake. However, if the splay‐fault slips only with a megathrust earthquake every ~1000 years, the fault would slip ~3.7 m per event, equivalent to a magnitude ~7.5 earthquake.