•This article uses methods and theory from urban economics and economic geography to examine urban structure at Teotihuacan.•We find evidence of spatial equilibrium at Teotihuacan.•Competition for desirable land near urban amenities acted as a gravitational force for residential location and land use preferences.•We find evidence of a strong spatial gradient of class composition indicating that higher wealth groups outcompeted lower wealth groups for more valuable land. This study employs canonical methods and theory from urban economics and economic geography to analyze the urban structure of the ancient city of Teotihuacan. We present evidence that Teotihuacan’s overall configuration, which includes spatial patterning in land use, demography, and social class, reveals density gradients that are consistent with the assumptions of urban spatial equilibrium. In general, spatial equilibrium posits that locational advantages conferred by proximity to desirable land (i.e., urban amenities) are offset by the associated land and transportation costs. These results provide insights into the process of urbanization at the ancient metropolis as well as its structural underpinnings such as social inequality and spatial competition. Based on these results, we argue that the framework employed here is broadly applicable to archaeological case studies and can lead to new inferences about the comparative dynamics of ancient urbanization.