The seismic activity of the volcanic field of Kos-Yali-Nisyros, south-eastern part of the South Aegean Volcanic Arc, was observed by an “amphibious” seismic network consisting of nine 3C stand-alone land stations and four 4C ocean bottom seismographs. The array operated for a period of four months, from June 28 to October 13, 2001. Accuracy location of the seismic foci was optimized by using a 1D local velocity model obtained by active seismic observations. 1190 micro-earthquakes over a threshold magnitude of 0.7 ML were identified, using arrivals recorded by a minimum of four stations per event. The average RMS of the travel time residuals was better than 0.1 s for events located within the array and 0.2 s for those lying outside. Regional seismicity and focal mechanisms of larger events in the fault system Gökova, Kos-Nisyros and that of Karpathos basins delineate the extensional boundary to the north and west of the Dodecanese islands block. This block unit, although internally strongly fractured, is decoupled from the Aegean microplate. It is anticlockwise rotated with the west Karpathos basin that limits its western flank—having the largest width and maximum subsidence. These processes are very young having their maximum intensity at the bend of the fault system from E-ENE direction to nearly N-S striking. The magmatic intrusions are concentrated in this area of bending. They are driven by the subduction of the Ionian oceanic lithosphere below the Aegean microplate with deep seismic foci of 150 to 180 km depth building a cluster below the Nisyros and Kos islands. The mapped seismicity is mainly induced by the volcanic processes of magma intrusion within 4 km below Nisyros and apophytic branches of magma below Yali and Strongyli islands. The main magma chamber is below 6 km depth and the induced pressure in the upper crust, due to magma injection, generates fractures and hydrothermal circulation followed by high local seismicity of small magnitude events.