Explosive volcanic eruptions generate a range of physical processes with great hazard potential. Subsequent fluvial processes have major effects on channel and valley-floor geometry, potentially resulting in extreme sediment and large wood (LW) yields. The associated impacts can be severe, both immediately and in the longer term as river channels are permanently reworking the large volumes of their own sediment. The city of Chaitén (Lake District, Chile) is a unique case, since sediment- and wood-laden flows in the Blanco River may still pose, even 11 years after the paroxysmal eruption of the Chaitén volcano, large urban sectors at risk. Thoroughly assessing the flood hazard and the generated impact for such urban settings is, hence, of utmost importance. To achieve this goal, we designed a workflow integrating the following tasks: (i) hydrologic modelling at catchment scale employing the HEC-HMS model to obtain flood hydrographs for a 30 and 100 years flood, respectively, (ii) estimation of the sediment fluxes to establish reliable boundary conditions for (iii) the subsequent extensive 2D flood modelling with the model Iber in the unconfined floodplain and delta of the Blanco River including also the effects of possible clogging of the “Austral Road” bridge with transported LW, (iv) quantification of a series of building performance indicators for a set of 13 residential buildings as a basis for subsequent vulnerability and risk assessment. We found that, even without a new volcanic eruption as a potent hazard trigger, vast urban sectors are still exposed to flooding, in particular if LW gets entrapped at the “Austral Road” bridge and channel outbursts occur as a consequence of the reduced conveyance and backwater rise. Our results indicate a great spatial variability of flood impacts, being worst in the urban areas either located closely to the channel outburst locations or where overland flow locally channelizes on concave floodplain topographies. Based on our findings we outline provisional recommendations for risk mitigation and informed land use planning.