[6] The water area comprises Alvarado Park Lake, a reservoir on Turkey Creek 3 miles (5 km) southwest of the city.

Alvarado is drained by the North Fork of Chambers Creek, a southeast-flowing stream that is part of the Trinity River watershed.

Alvarado's nearest neighboring communities are Venus to the east, Keene to the west, Burleson to the north, and Grandview to the south.

In 2007 Sabre Tubular Structures built a new 200,000-square-foot (19,000 m2) facility located on 147 acres (59 ha) on the eastern side of town.

[12] In the latter part of the 2000s, development of natural gas wells in the Barnett Shale were a source of prosperity for the city and many property owners benefited from drilling activity, pipeline construction and royalty payments.