Having thus foiled all the endeavours of a general who had gained high reputation in the wars of Italy, Germany, and Flanders, Janequeo proceeded to attack the recently constructed fortress of Puchanqui, not far from which she defeated and slew the commandant, Aranda, who had advanced to meet her with a part of the garrison. Not being able to gain possession of this fort, she retired at the commencement of the rainy season to the mountains near Villarica, where she fortified herself in a place surrounded by precipices, from whence she continually infested the environs of that city in such a manner that no one dared to venture beyond the walls. Moved by the distresses of the citizens, the governor sent his brother Don Luis to their aid, with the greater part of two reinforcements which he had recently received from Peru, under the command of Castillejo and Penalosa. The intrepid Janequeo awaited him in her fortified post, which she deemed secure, and repelled for a long time the various assaults of the Spaniards with great presence of mind. At length, her soldiers being dispersed by the fire of the artillery, she had to seek for safety in flight. Her brother was made prisoner, and obtained his life on condition of promising to keep his sister quiet, and to secure the friendship of his vassals and adherents to the Spaniards. But, while proposing this measure in a national council, he was killed by the ulmen Catipiuque, who abhorred every species of reconciliation with the enemy.

The old toqui, Guanoalca, died about the close of 1590, and a young and enterprising warrior, named Quintuguenu, was elected in his stead in the year following. Being ambitious of acquiring military glory, the new toqui assaulted and took the fort of Mariguenu by assault, and established himself on the top of that famous mountain with two thousand men, hoping to render himself as celebrated there as Lautaro had been formerly, by gaining an important victory over the Spaniards. Not dismayed by the misfortunes which had befallen his countrymen in that ill-omened place, the governor put himself at the head of a thousand Spaniards and a large auxiliary force of Indians, and marched without delay for Mariguenu, determined upon dislodging the Araucanians or of besieging them in their post. Having disposed his troops in order, and given the necessary directions, he began at daybreak to ascend the difficult and steep defile, leading the advanced guard in person, directly before which was a forlorn hope of twenty half-pay officers much experienced in similar warfare. He had scarcely got half way up the mountain when he was attacked with the utmost fury by Quintuguenu; but animating his troops by his voice and example, he sustained for more than an hour the utmost efforts of the enemy, and gained the top of the defile by persevering bravery. On reaching the level summit of the mountain, the Araucanians were forced to take refuge within their entrenchments, which they did however in excellent order. The Araucanians, exhorting each other to conquer or die for their country, defended their camp with incredible valour against the utmost efforts of the Spaniards till mid-day; when, after a most obstinate resistance, Don Carlos Irrazabel forced the lines on the left with his company, while at the same time the quarter-master and Rodolphus Lisperger, a valiant German officer, penetrated with their companies on the front and the right of the encampment. Though surrounded on every side, Quintuguenu maintained his troops in good order, earnestly exhorting them not to dishonour themselves by suffering an ignominious defeat in a place which had so often been the theatre of victory to their nation, and by his efforts and bravery long kept the fate of the battle in suspense. While he flew from rank to rank, animating his men and constantly making head against the enemy, he fell pierced with three mortal wounds given by the governor, who had taken aim at him. His last words were an enthusiastic exclamation in favour of liberty. On the death of the toqui, part of the Araucanian troops allowed themselves to be cut in pieces, and the rest sought their safety in flight. Almost all the auxiliaries on the side of the Spaniards fell in this successful battle, but only twenty of the Spaniards were slain, among whom was a Portuguese knight of the order of Christ, who was killed at the commencement of the action.

Highly gratified with being the first who had defeated the Araucanians on the formidable heights of Mariguenu, the governor conducted his victorious army to the sea-shore, where he was saluted by repeated discharges of cannon from the fleet of Peru, then scouring the coast in search of the English squadron, and which had witnessed the victory. These were answered by the army with repeated vollies of musquetry, and the customary demonstrations of joy on so glorious an occasion. Availing himself of the opportunity afforded by the presence of the fleet, the governor sent the quarter-master-general into Peru to solicit the greatest possible reinforcement of troops without delay, to enable him to prosecute the war to advantage in the ensuing campaign. In the mean time, he abandoned the ancient scite of the fort of Arauco, and rebuilt it in a more convenient situation on the sea-shore. Colocolo, son of the celebrated ulmen of that name, but of a very different disposition from that of his father, was lord of that district, and being indignant at seeing his country occupied by the Spaniards endeavoured to drive them off; but being defeated and made prisoner, he solicited for his life, which he obtained on condition of persuading his subjects to return from the mountains and to submit to the authority of the Spaniards. On being urged by his wife Millayene, to fulfil the promise made by their chief, they replied that he ought to endure his misfortunes with the firmness that became his rank and lineage; that they were willing to encounter every danger under his command, and according to his example, or to revenge the outrages he might be subjected to, but could never consent to betray their country by submitting to obey its bitterest enemies. Irritated by this patriotic resolution of his subjects, Colocolo devoted himself in future to the service of the Spaniards, and even served them as a guide in the pursuit of his own people among the fastnesses in which they had taken refuge.

In the year 1592 there happened to be a Spanish prisoner among the Araucanians, who by his ingratiating manners had acquired the confidence and esteem of the principal people of that high-spirited nation. Either by secret instructions from the governor, or from gratitude for the kind treatment he had received while prisoner, this man exerted himself to effectuate a treaty of peace between the nations, and had at one time a fair prospect of bringing it about. But the preliminaries which he proposed as the ground work of a reconciliation did not prove satisfactory to either party, and all his endeavours were abortive. The governor, being irritated at the rejection of his proposals, marched into the province of Tucapel which he laid waste on every side with fire and sword. As Paillaeco, who had been elected toqui in place of Quintuguenu, did not think his force sufficient to oppose the enemy in the open field, he endeavoured to draw them into an ambush. With this view, he placed an hundred horsemen at the entrance of a wood, within which he had concealed the remainder of his troops, giving orders to the horse to counterfeit flight on the coming up of the enemy to draw them within reach of the ambushment. This scheme seemed at first to promise success, but in the end turned against its contriver. The Araucanians took to flight and were pursued by the Spaniards, who soon discovered that it was only a stratagem, and turned back accordingly as if struck with a panic, in hopes of decoying the enemy to quit the wood and attack them in the open field. Not aware of this repetition of their own trick, the Araucanians fell into the snare they had laid for their enemies; and being surrounded on every side, were mostly cut in pieces together with their commander, after selling their lives at a dear rate, a small remnant taking refuge in the marshes from the pursuit of the victors.