Particulate matter measuring 2.5 micrometres or less, known as PM2.5, reached 158 micrograms per cubic metre of air at one measuring station on Tuesday morning, more than six times the World Health Organisation daily mean recommended limit.
PM2.5 particles are thought to be particularly damaging because they are so small, they can penetrate the deepest parts of the lungs.
More than 21 million people live in Mexico City's metropolitan area and it was once infamous for its poor air quality. Air pollution levels dropped in the late 1990s but have again been on the rise in recent years.
The city lies in a valley and when there is little wind, the air can quickly become stagnant.
Mexico City's environmental commission advised residents to avoid outdoor activities and Mexico's first division football league postponed a match between León and Club América, which was due to be played in the capital on Wednesday.
Mayor Claudia Sheinbaum said she would consider cancelling school classes if the pollution got any worse. She said schools were already keeping their pupils indoors at break time.