In order to explain damage and observed ground motions in Mexico City during the 1985 Michoacán earthquake, simultaneous consideration must be given to source, path, and site conditions. This is clear from teleseismic records and local vertical displacements. Incident waves had an important part of energy in the frequency band of 0.3-1 Hz. Damage distribution and observed motion in the lake bed zone cannot be satisfactorily explained using one-dimensional theory. The effects of lateral irregularities are required. To assess its effects we describe the stratigraphic setting of the valley and discuss some features of damage distribution with results for one- and two-dimensional wave propagation models. These are useful to establish on quantitative basis the importance of lateral heterogeneity.