We examined channel flow and suspended sediment transport processes within the lower Rio Puerco arroyo, located in semi-arid north-central New Mexico, in an attempt to answer the question: Why did arroyo incision stop by about 1936? Channel flow model results show that in the narrow, incised channel of 1936, the boundary shear stress during a large flood was highest over the lower banks and bank toes, causing a higher potential for erosion of these surfaces than of the channel bed. This would have caused the channel (and arroyo) to widen, and the higher sediment fluxes from those surfaces would have inhibited the capacity of the flow to erode the bed. We found that volumes of sediment delivered to the channel from local erosion of the arroyo wall did not exceed the capacity of the flow to transport sediment, including sand, in suspension. However, sediment supplied from erosion upstream of our study reach may have reduced the capacity of the flow to erode the bed. Our results suggest that arroyo incision ended with the observed reduction in flood peak magnitude, frequency, and duration after 1941.