In Mexico, Indigenous people were hospitalised and killed by COVID-19 at a disproportionate rate compared to the non-Indigenous population. The main factors contributing to this were poor health conditions and impoverished social and economic circumstances within the country. The objective of this study is to examine the extent to which ethnic disparities are attributable to processes of structural discrimination and further explore the factors that exacerbate or mitigate them. Using administrative public data on COVID-19 and Census information, this study uses the Oaxaca-Blinder decomposition method to examine the extent to which disparities are illegitimate and signal discrimination against Indigenous people. The results show that although ethnic disparities were mainly attributable to observable differences in individual and contextual characteristics, 22.8% (p < 0.001) of the ethnic gap in hospitalisations, 17.5% in early deaths and 16.4% in overall deaths remained unexplained and could potentially indicate systemic discrimination. These findings highlight that pre-existing and longstanding illegitimate disparities against Indigenous people jeopardise the capacity of multi-ethnic countries to achieve social justice in health.