Shear failure is the dominant mode of earthquake-causing rock failure along faults. High fluid pressure can also potentially induce rock failure by opening cavities and cracks, but an active example of this process has not been directly observed in a fault zone. Using borehole array data collected along the low-stress Chelungpu fault zone, Taiwan, we observed several small seismic events (I-type events) in a fluid-rich permeable zone directly below the impermeable slip zone of the 1999 moment magnitude 7.6 Chi-Chi earthquake. Modeling of the events suggests an isotropic, nonshear source mechanism likely associated with natural hydraulic fractures. These seismic events may be associated with the formation of veins and other fluid features often observed in rocks surrounding fault zones and may be similar to artificially induced hydraulic fracturing.