In order to help inform interventions in food supply systems, urban areas, and sustainable development, this paper traces the development of the milk supply system to Mexico City. The co-evolution of urban supply and demand factors with policy objectives is dealt with in three distinct periods. (1) The early 20th century in which milk production became an end in itself of cattle raising, with the introduction of new forage crops and the concept of the `dairy basin'. (2) The period of the paternalist state is characterised by policy objectives to support Mexican dairy producers and ensure milk supply to the burgeoning urban population. To these ends, there was increasing government intervention in cattle breeding and production systems, distribution and processing of milk, and the importation of powdered milk from international stocks. (3) The neoliberal period included a retreat of the state from quality control enforcement, the inclusion of imported milk the industrialisation process of products for national sale, and concentration of dairy enterprises into fewer hands. While ealier policy objectives have indeed been achieved, three contradictions pose a threat to the systems sustainability: the disarticulation of national supply and demand by means of the financial attractiveness of imported milk stocks; the now minimal contribution of the urban area to its own milk consumption, and the poor quality of industrialised milk products reaching the consumer. It is expected that the system will persist essentially unchanged in the near future, as the various actors involved each act in their own self-interest. Constructive interventions should focus on the contradictions created by the pursual of previous policy approaches, and necessarily address issues of sustainability at various scales.