The Salar de Atacama forms one of a series of forearc basins developed along the western flank of the Central Andes. Exposed along the northwest margin of the basin, a salt-cored range, the Cordillera de la Sal, records the Mid-Miocene to recent sedimentological and structural development of this basin. Sediments of the Mid-Miocene Vilama Formation record the complex interaction between regional/local climate change, halokinesis and compressional deformation. This study reveals how these factors have controlled the facies development and distribution within the Salar de Atacama. Detailed sedimentary logging, cross-sections and present day geomorphology through the northern Cordillera de la Sal have been used to establish a lithostratigraphy, chronostratigraphy and the regional distribution of the Vilama Formation. The Vilama Formation documents an increase in aridity with a hiatus in sedimentation from Mid-Miocene to 9 Ma with initial uplift of the Cordillera de la Sal. From 9 Ma to 8.5 Ma deposition of a meandering fluvial system is recorded followed by a rapid decrease in sedimentation till 6 Ma. From 6 to 2 Ma, the deposition of extensive palustrine carbonates and distal alluvial–mudflat–lacustrine demonstrates the existence of an extensive lake within the Salar de Atacama. Post 2 Ma, the lake decreased in size and braided alluvial gravels associated with alluvial fans were widespread through the region suggesting a final shift to hyperarid conditions. By comparing the Vilama Formation with similar age facies throughout northern Chile and southern Peru, several shifts in climate are recognized. Climate signatures within northern Chile appear to be largely diachronous with the last regional event in the Mid-Miocene. Since that time, humid events have been restricted to either Precordillerian basins or the Central Atacama. Within the Central Atacama, the final switch to hyperarid conditions was not till the earliest Pleistocene, much later than previously estimated within the region.