The workers were digging in Chinatown at the former home of Little Joe's restaurant. The $100 million project to build Blossom Plaza began earlier this month.
"Mother Ditch," also known as "Zanja Madre," was a 90-mile network that fed water from the Los Angeles River around 1781. It was originally an open ditch fed by a small dam built in the river, but decades later, a water wheel was constructed to increase the ditch's gravitational flow to a brick reservoir near Olvera Street.
According to the Los Angeles Times, workers found about 73 feet of the brick pipe on Monday.
City Councilman Gilbert Cedillo said a 40-foot section of the historic pipe will be removed Saturday to be preserved for future display.
Parts of the old water system have surfaced over the years. In 2005, workers constructing the Gold Line light rail extension came across a section of the Zanja Madre. About 75 feet of the uncovered pipe remain visible next to the trolley line and Broadway.
Another remnant can be seen in the basement of Olvera Street's 1818 Avila Adobe.
The Associated Press contributed to this report.