An experiment was carried out to study the effect of three levels of water application on yield and oil quality for an olive ('Picual') orchard, located in the Pencahue Valley, Maule Region of Chile (35 degrees 23' S; 71 degrees 44' W), during the 2007-2008 growing season. The 8 year-old trees were irrigated by drip irrigation and trained on monocone training system with a planting density of 6x3 m. Levels of water application were: T1 = 100% of the actual evapotranspiration (ETa) between the beginning of massive pit hardening (MPH) and veraison (V); T2 = 60% between MPH and V; and T3 = 30% of ETa during pit hardening and 60% of ETa from the end of pit hardening to V. Fruit yield showed significant differences among treatments where T2 presented the highest yield (15.5 t ha(-1)). However, oil yield was not affected by the levels of water application. Oil yield varied between 2.3 t ha(-1) and 2.5 t ha(-1). Also, results indicate that there were not significant differences on oil content, acidity, peroxide number, K-270, and K-232. However, the total polyphenols for T2 and T3 were greater than those for T1.