No evidence exists of distillation in Mexico before European contact. The Philippine people in Colima established the practice in the 16th Century to produce coconut spirits. Botanical, toponymic, archaeological, and ethnohistoric data are presented indicating that agave distillation began in Colima, in the lower Armería-Ayuquila and Coahuayana-Tuxpan river basins, using Agave angustifolia Haw. and through adaptation of the Philippine coconut spirits distillation technique. Subsequent selection and cultivation of agaves led to their domestication and diversification. This did not take place in the lower river basins, where agave populations tended to disappear. The distillation technique spread to the foothills of Colima volcanoes and from there to all of western Mexico, leading to creation of tequila and other agave spirits. Two factors aided producers in avoiding strict Colonial prohibitions and were therefore key to the diffusion and persistence of agave spirits production: (1) clandestine fermentation in sealed, underground pits carved from bedrock, a native, pre-European contact technique; and (2) small, easy-to-use Philippine-type stills that could be hidden from authorities and allowed use of a broad range of agave species.