A reliable estimation of seismic hazard‐facing Mexico City from local earthquakes has suffered from poor seismic instrumentation, complex crustal structure, large and variable site amplification, and lack of knowledge of recurrence period of earthquakes on the mapped faults. Owing to recent improvement in local seismic networks, an earthquake swarm activity, which occurred in June–August 2019, was well recorded. The largest event of the sequence, an 3.2 earthquake, caused panic in the city and produced peak ground acceleration (PGA) exceeding at the closest station (MHVM) about 1 km away. An analysis of the event shows that it had normal‐faulting focal mechanism, consistent with northeast–southwest‐oriented mapped faults in the region. It was located at a depth of and had a low stress drop (). We find that the high PGA for this low stress‐drop event resulted from high‐frequency amplification at MHVM (about factor of around 13 Hz), likely due to topographic site effects, superimposed on a pervasive broadband amplification of seismic waves at hill‐zone sites in the Valley of Mexico (up to in the frequency band of 0.2–10 Hz). Simulation of ground motion for a scenario 5.0 earthquake, using an empirical Green’s function technique, reveals that such an event may give rise to significant seismic intensities in the lake‐bed zone of Mexico City. The results emphasize the need to re‐evaluate the seismic hazard to Mexico City from local crustal earthquakes in the Valley of Mexico.