This paper aims to contribute to two areas where the empirical research is still scarcepoverty dynamics and indigenous peoples’ welfare. The coverage area of this study is Mexico, a country where indigenous people represent 9.5% of the total population and face a significant gap in their welfare levels in comparison to non-indigenous individuals. By following a components approach, poverty is found to be a chronic phenomenon in Mexico with the chronic component accounting for 75% of the total poverty. Furthermore, by applying a three-fold Blinder-Oaxaca decomposition and Tobit regressions, the analysis highlights some factors that contribute to explaining the disadvantaged living conditions faced by indigenous people. These issues include: Lower schooling endowments and returns, lack of adequate infrastructure, fewer economic opportunities either because of labor discrimination or the lack of jobs and access to credit, as well as higher vulnerability to natural disasters.