The Koyna-Warna area of India is one of the best worldwide examples of reservoir-induced seismicity, with the distinction of having generated the largest known induced earthquake (M6.3 on 10 December 1967) and persistent moderate-magnitude (>M5) events for nearly 50 years. Yet, the fault structure and tectonic setting that has accommodated the induced seismicity is poorly known, in part because the seismic events occur beneath a thick sequence of basalt layers. On the basis of the alignment of earthquake epicenters over an ~50 year period, lateral variations in focal mechanisms, upper-crustal tomographic velocity images, geophysical data (aeromagnetic, gravity, and magnetotelluric), geomorphic data, and correlation with similar structures elsewhere, we suggest that the Koyna-Warna area lies within a right step between northwest trending, right-lateral faults. The sub-basalt basement may form a local structural depression (pull-apart basin) caused by extension within the step-over zone between the right-lateral faults. Our postulated model accounts for the observed pattern of normal faulting in a region that is dominated by north-south directed compression. The right-lateral faults extend well beyond the immediate Koyna-Warna area, possibly suggesting a more extensive zone of seismic hazards for the central India area. Induced seismic events have been observed many places worldwide, but relatively large-magnitude induced events are less common because critically stressed, preexisting structures are a necessary component. We suggest that releasing bends and fault step-overs like those we postulate for the Koyna-Warna area may serve as an ideal tectonic environment for generating moderate- to large- magnitude induced (reservoir, injection, etc.) earthquakes.