Two sedimentary units are recognized by means of stratigraphic and sedimentological analyses at Monte Verde, a late Pleistocene archeological site with stone tools and well-preserved wood artifacts and botanical remains, that lies southwest of Lago Llanquihue and north of the Golfo de Reloncavi in the southern end of the Chilean Central graben. The geological evidence shows that at no time after 33,000 yr BP, and perhaps since the first Llanquihue advance (before 56,000 yr BP), was the Monte Verde area covered by ice. Influences of two glacial advances at 20,000 and 15,000-14,500 yr BP are recognized at the site; effects of the Varas Interstade, however, are not identified. Rapid climatic change took place after the end of the Llanquihue Glaciation. It was shortly interrupted by a cool, wet period around 10,000 yr BP, after which a well-documented Hypsithermal (8270-4750 yr BP) accompanied by pyroclastic volcanism followed. The evidence indicates that around 13,000 yr BP 1) the site occupants settled on the sandy point bars and beaches of the old creek channel and 2) the area was habitated during cool and wet conditions similar to those that prevail in the area today. Evidence for reconstruction of the palaeo-environment and climate of the terminal Pleistocene and the preliminary implications of these findings for understanding the human occupation at Monte Verde are discussed.