In this study, we unravel the physical, chemical and mineralogical evolution of the active Tolhuaca geothermal system in the Andes of southern Chile. We used temperature measurements in the deep wells and geochemical analyses of borehole fluid samples to constrain present-day fluid conditions. In addition, we reconstructed the paleo-fluid temperatures and chemistry from microthermometry and LA-ICP-MS analysis of fluid inclusions taken from well-constrained parageneses in vein samples retrieved from a similar to 1000 m borehole core. Based on core logging, mineralogical observations and fluid inclusions data we identify four stages (51-S4) of progressive hydrothermal alteration. An early heating event (S1) was followed by the formation of a clay-rich cap in the upper zone (<670 m) and the development of a propylitic alteration assemblage at greater depth (S2). Boiling, flashing and brecciation occurred later (S3), followed by a final phase of fluid mixing and boiling (S4). The evolution of hydrothermal alteration at Tolhuaca has produced a mineralogical, hydrological and structural vertical segmentation of the system through the development of a low-permeability, low-cohesion clay-rich cap at shallow depth. The quantitative chemical analyses of fluid inclusions and borehole fluids reveal a significant change in chemical conditions during the evolution of Tolhuaca. Whereas borehole (present-day) fluids are rich in Au, B and As, but Cu-poor (B/Na similar to 10(0.5), As/Na similar to 10(-1.1), Cu/Na similar to 10(-42)), the paleofluids trapped in fluid inclusions are Cu-rich but poor in B and As (B/Na similar to 10(-1), As/Na similar to 10(-2.5), Cu/Na similar to 10(-2.5) in average). We interpret the fluctuations in fluid chemistry at Tolhuaca as the result of transient supply of metal-rich, magmatically derived fluids where As, Au and Cu are geochemically decoupled. Since these fluctuating physical and chemical conditions at the reservoir produced a mineralogical vertical segmentation of the system that affects the mechanical and hydrological properties of host rock, we explored the effect of the development of a low-cohesion low permeability clay cap on the conditions of fault rupture and on the long-term thermal structure of the system. These analyses were performed by using rock failure condition calculations and numerical simulations of heat and fluid flows. Calculations of the critical fluid pressures required to produce brittle rupture indicate that within the clay-rich cap, the creation or reactivation of highly permeable extensional fractures is inhibited. In contrast, in the deep upflow zone the less pervasive formation of clay mineral assemblages has allowed retention of rock strength and dilatant behavior during slip, sustaining high permeability conditions. Numerical simulations of heat and fluid flows support our observations and suggest that the presence of a low permeability clay cap has helped increase the duration of high-enthalpy conditions by a factor of three in the deep upflow zone at Tolhuaca geothermal system, when compared with an evolutionary scenario where a clay cap was not developed. Furthermore, our data demonstrate that the dynamic interplay between fluid flow, crack-seal processes and hydrothermal alteration are key factors in the evolution of the hydrothermal system, leading to the development of a high enthalpy reservoir at the flank of the dormant Tolhuaca volcano. (C) 2016 Elsevier B.V. All rights reserved.