From the zócalo, head north along the Alcalá pedestrian mall; just a block north of the Cathedral, you’ll arrive at a Oaxaca favorite, the Palacio de las Gemas (corner of Morelos and Alcalá, tel. 951/514-4603, 10 a.m.–8 p.m. Mon.–Sat.). Although specializing in semiprecious stones and jewelry, it has much more, including a host of charming hand-painted tinware Christmas decorations, Guerrero masks, and pre-Columbian reproductions in onyx and turquoise.
Continue north on Alcalá a block and step into La Mano Mágico (on the west side, just below the corner of Murguia, at Alcalá 203, tel./fax 951/516-4275, 10:30 a.m.–3:00 p.m. and 4–8 p.m. Mon.–Sat.). The shop offers both a colorful exposition of crafts from all over Mexico and a patio workshop where artisans work, dyeing wool and weaving examples of the lovely, museum-quality rugs and serapes that adorn the walls.
Across the street, step into Cuchillos Alcalá (Alcalá 206, tel. 951/514-7943, 10 a.m.–8 p.m. Mon.–Sat.) for an interesting selection of cutlery—knives, swords, scissors—and much more from a longtime Oaxacan tradition.
Take a one-block detour west along Matamoros to Casa de Artesaniás (Matamoros 105, corner of Vigil, tel. 951/516-5062, 9 a.m.–8 p.m. Mon.–Sat.). Here, a cooperative of about six dozen Oaxaca artisan families offers a wide handicrafts selection, including rainbows of fantastic alebrijes, from Tilcajete  and Arrazola , a treasury of glistening black pottery from Coyotepec , and preciously embroidered dresses from San Antonino Castillo Velasco .
Return and continue uphill on Alcalá, a block farther north, to the Plaza Alcalá complex, southwest corner of M. Bravo, which has both an outstanding courtyard restaurant and some good shops. Best among them is an exceptional bookstore, Librería Amate (307 Alcal, tel. 951/516-6960, 951/516-7181, amatebooks [at] prodigy [dot] net [dot] mx, 10 a.m.–8 p.m.). Personable owner Henry Wangeman stocks an expertly selected library of English-language books about Mexico, including archaeology, cookbooks, ethnography, guides, history, literature, maps, postcards, and much more.
If you’re interested in fine weavings, step directly across Alcalá to the Tapetes de Teotitlán shop (11 a.m.–7:30 p.m. Mon.–Sat., 1–7 p.m. Sun.) of the Martínez family of the famous Teotitlán del Valle  weaving village. Here, you’re looking at the real thing: fine, mostly traditional designs, made of all-natural dyes.
Half a block farther uphill, be sure to look inside Oro de Monte Albán jewelry store (Alcalá 403, tel. 951/514-3813, 10 a.m.–8 p.m. Mon.–Sat., noon–8 p.m. Sun.), across from the Iglesia de Santo Domingo . This extraordinary family-run enterprise carries on Oaxaca’s venerable goldsmithing tradition as the sole licensed manufacturer of replicas from the renowned treasure of Monte Albán  Tomb 7. Besides the luscious, museum-quality reproductions, Oro de Monte Albán offers a fine assortment of in-house silver and gold earrings, charm bracelets, necklaces, brooches, and much more.
While you’re at Alcalá, be sure to peruse the colorful outdoor displays of for-sale local paintings and native-style women’s blouses, skirts, dresses (blusas, enredos, vestidos) and huipiles that decorate Plaza Labastida just south, across Abasolo, from the Santo Domingo church.
Rewards await shoppers who are willing to walk a few long blocks farther uphill to the state-run IAO (Instituto Oaxaqueño de las Artesanías) (Garcia Vigil 809, tel. 951/514-4030 or 951/514-0861, 9 a.m.–8 p.m. Mon.–Sat., 9 a.m.–5 p.m. Sun.). You can pick from a broad, authentic, and very traditional selection of carved animals, ceramics, huipiles, masks, tinware, wedding dresses, and much more. Prices vary: cheap on some items and high on others.