In June 2011, an eruption of rhyolite magma began at the Puyehue–Cordón Caulle volcanic complex, southern Chile. By January 2012, explosive activity had declined from sustained pyroclastic (Plinian to sub-Plinian) fountaining to mixed gas and ash jetting punctuated by Vulcanian blasts. This explosive activity was accompanied by synchronous effusion of obsidian lava in a hybrid explosive–effusive eruption. Fortuitous climatic conditions permitted ground-based observation and video recording of transient vent dynamics as well as real-time collection of proximal juvenile ash as it sedimented from the active plume. The main eruptive vent complex and site of lava effusion were represented by two loci of Vulcanian blasts within a single tephra cone containing a pancake-shaped proto-lava dome. These blast loci each consisted of clusters of sub-vents that expressed correlated shifts in eruption intensity, indicating the presence of partially connected and/or branching zones of high permeability within the upper conduit. Pyroclast textures were examined by X-ray computed microtomography and their permeability was modelled by lattice Boltzmann simulations. The porosity (39 to 67%) and Darcian permeability (3.1 × 10− 15 m2 perpendicular to fabric to 3.8 × 10− 11 m2 parallel to fabric) of fine ash emitted during ash jetting indicate that the permeable zones comprised highly sheared, tube-like bubbly magma, and contrast with the low porosity (~ 17%) and nul permeability of bombs ejected to hundreds of metres from the vent in Vulcanian blasts. Residual H2O content of ash (0.14 wt.%) and two bombs (0.2–0.25 wt.%), determined by Karl–Fischer titration indicate degassing of this pyroclastic material to near-atmospheric pressures. Ash textures and simple degassing/vesiculation models indicate the onset of permeability by ductile processes of shear-enhanced bubble coalescence in the upper 1 to 1.5 km of the conduit. Repeated ash jetting and Vulcanian blasts indicate that such ductile processes were not sufficiently effective to accommodate all degassing requirements, and additional brittle (e.g., fragmentation) events transiently assisted in maintaining an open-system degassing regime that permitted long-lived, hybrid explosive–effusive activity. The eruption at Cordón Caulle has provided an excellent opportunity to closely observe key processes of silicic volcanism.