A Mexican standoff is most precisely a confrontation between three opponents facing each other. Each participant holds power over one opponent, and is at the mercy of the other opponent. Following any path of who holds power over whom invariably leads back to the original person after visiting all other participants. More opponents can be added as long as they fit into the above rule and thus do not change the balance of power. In movies, the power dynamic commonly involves holding and being held at gunpoint.

The tactics for such a confrontation are substantially different than for a duel with only two opponents, where the first to shoot has the advantage. In a confrontation with three mutually hostile participants, the first to shoot is at a tactical disadvantage. If opponent A shoots opponent B, then while so occupied, opponent C can shoot A, thus winning the conflict. Since it is the second opponent to shoot that has the advantage, no one wants to go first.

In popular usage, the Mexican standoff is sometimes used to refer to confrontations with only two opponents. Discussions of the Soviet Union – United States nuclear confrontation during the Cold War frequently used the term, specifically in reference to the Cuban Missile Crisis of 1962. The key element that makes such situations Mexican standoffs is the very close equality in power among all involved. The inability for any one party to advance their position safely is a condition common to any standoff; in a Mexican standoff, there is additionally no safe way for any party to withdraw from their position, making the standoff effectively permanent.