An outbreak of classical dengue fever occurred from March to August 1988 in the city of Taxco, Guerrero State, Mexico. Taxco is at an elevation of 1,700 meters above sea level, and this study represents the highest altitude at which an outbreak of dengue has been documented. An investigation was conducted to obtain serologic confirmation of dengue infection, determine the extent of the outbreak, and identify risk factors for dengue illness. Toxorhynchites cell lines were used for viral isolation, and hemagglutination inhibition was used to measure anti-dengue antibody titers. The case definition used in the investigation was any person with fever, headache, myalgias, and arthralgias, or rash or retroocular pain. Dengue virus type 1 was isolated from five acute cases. Of 1,686 persons living in the affected area, 42% (715) met the case definition. Large (200-liter) water containers were significantly associated with infection (relative risk = 1.7, 95% confidence interval 1.5-1.9). The effect of altitude on epidemic transmission is most likely modulated by seasonal temperatures. The epidemiologic and serologic confirmation of a dengue outbreak at 1,700 meters above sea level represents the capability of Aedes aegypti to adapt to new environments, and the potential for epidemic spread in cities at comparable altitudes or higher.