El Teatro de la Esperanza began as a student group composed of Chicanos attending the University of California at Santa Barbara in 1969. Then known as Teatro Mecha, the Teatro left the ranks of a student organization, called M.E.Ch.A., in order to get more fully involved in Santa Barbara's Chicano community, in the summer of 1971. This move proved to be an asset for both the community and the Teatro, for the group took part in the acquisition and remodeling of a 22,000 square foot warehouse which soon became La Casa de la Raza (The House of the People).

Prior to 1965, there was little unity of sociopolitical direction among Chicanos and Mexicans in the United States, and the Casa was a symbol of the effort to address the problems of this bilingual minority. The Casa maintains a line of communication with the barrio by offering over thirty programs ranging from a free health clinic to an office of information for undocumented workers, otherwise known as illegal aliens.