Subaqueous slope failure mechanisms are still poorly understood partly because they are difficult to study due to the remote location of submarine landslides. Landslides in lakes are smaller in size and more readily accessible and therefore represent a good alternative to their marine counterparts. Lake Villarrica, located in South-Central Chile, experienced significant slope failure and serves here as an exemplary study area for subaqueous landslide initiation mechanisms in tectonically active settings. Coring and CPTU testing were undertaken with the MARUM free-fall CPTU deployed adjacent to the coring sites where all lithological units involved in the slope failure were sampled. Using geotechnical methods such as pseudo-static factor of safety analysis and cyclic triaxial testing, three types of soils (i.e., diatomaceous ooze, volcanic ash, and quick clay) were analyzed for their role in slope failure, and earthquake shaking was identified as the primary trigger mechanism. The investigated landslide consisted of two distinct phases. During the first phase, slope failure was initiated above a tephra layer. In the second phase, retrogression led to the shoreward extension of the slide scarp along a second failure plane located in a stratigraphically deeper, extremely sensitive lithology (i.e., quick clay). Results show that liquefaction of buried tephra layers was unlikely, but such layers might still have contributed to a reduction in shear strength along the contact area with the neighboring sediment. Furthermore, cyclic shaking-induced pore pressure in diatomaceous ooze may be similar to that in granular soils. We generally infer that failure mechanisms observed in this study are equally important for landslide initiation in submarine settings as diatomaceous ooze intercalated with volcanic ash may be abundantly present along active continental margins.