Recent excavations in Tlailotlacan, the “Oaxaca barrio,” near the western periphery of the ancient city of Teotihuacan, revealed remains of irrigation features associated with the early history of the city. Small floodwater irrigation canals were found underneath a residential structure that had been occupied by Zapotec immigrants from Oaxaca. Radiocarbon dating, corroborated by ceramic evidence, places the earliest architecture in the Early Tlamimilolpa phase (ca. a.d. 200–300), thus providing a concrete terminal date for the hydraulic system, an advantage not enjoyed by previous canal explorations in the region. The hydraulic features consist of segments of two superimposed canal networks that, based on associated pottery, date to the Terminal Formative period (Tzacualli and Miccoatli phases), which represents the earliest well-documented date for the use of irrigation at Teotihuacan. Shortly after the canals were abandoned, control over this land passed from the original inhabitants to Zapotec immigrants. We suggest that this change in ownership and land use directly involved the Teotihuacan state and was part of a policy of maintaining control over the location of economically important “resources,” including foreign immigrants like the Zapotec, who had important trade connections.