Fault rock assemblages reflect interaction between deformation, stress, temperature, fluid, and chemical regimes on distinct spatial and temporal scales at various positions in the crust. Here we interpret measurements made in the hanging‐wall of the Alpine Fault during the second stage of the Deep Fault Drilling Project (DFDP‐2). We present observational evidence for extensive fracturing and high hanging‐wall hydraulic conductivity (∼10⁻⁹to 10⁻⁷m/s, corresponding to permeability of ∼10⁻¹⁶to 10⁻¹⁴m²) extending several hundred meters from the fault's principal slip zone. Mud losses, gas chemistry anomalies, and petrophysical data indicate that a subset of fractures intersected by the borehole are capable of transmitting fluid volumes of several cubic meters on time scales of hours. DFDP‐2 observations and other data suggest that this hydrogeologically active portion of the fault zone in the hanging‐wall is several kilometers wide in the uppermost crust. This finding is consistent with numerical models of earthquake rupture and off‐fault damage. We conclude that the mechanically and hydrogeologically active part of the Alpine Fault is a more dynamic and extensive feature than commonly described in models based on exhumed faults. We propose that the hydrogeologically active damage zone of the Alpine Fault and other large active faults in areas of high topographic relief can be subdivided into an inner zone in which damage is controlled principally by earthquake rupture processes and an outer zone in which damage reflects coseismic shaking, strain accumulation and release on interseismic timescales, and inherited fracturing related to exhumation.