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Capitan Toledano plans to interrogate two prisoners who were seized when the gunpowder was recovered. The prisoners warn Figueroa, one of the magistrado's men, that they will talk unless someone helps them escape. Instead, they are found dead in their cell the next morning. A doctor examines the bodies and suspects murder, but the magistrado announces that it was suicide.

No sooner does the honest new commandante arrive than he is assassinated by a mysterious stranger who frames an elderly beggar for the crime and appears to be part of a larger conspiracy.

After Zorro hides his wounded father in the secret cave, as Don Diego he must divert Captain Monastario and his soldiers who are searching for the old man.

The kidnappers send word that Anna Maria must meet them if she wants proof her father is still alive, but Diego warns her it is a trick. Romero argues that she must go, so she agrees to go with him, Garcia and Reyes.

Bernardo, who is keeping watch over Varga, is disturbed to see Garcia leading a patrol of lancers out of the cuartel. Even more disturbing is the sight of several strangers who drift into the Eagle's headquarters. When he tries to look inside, the gates are locked, so he rushes to warn Diego of the threat.

It is a calm morning in Spanish California, and Sergeant Dimetrio Lopez Garcia is putting up posters, with another soldier, which are asking for reward money for Don Ignacio Torres and the now famous Zorro.

The fake Ortega and the magistrado announce they have captured Zorro, and a cart holding a masked man is dragged into the town square. A public unmasking will be held at noon, and Diego fears that an innocent man will be charged with Zorro's "crimes". He also realizes it may all be a trap, so when he dons his costume and rides into the square to free the prisoner, he watches carefully for soldiers.

With the death of the magistrado, the Eagle takes a more active role in his conspiracy to rule southern California. He sends two of his men, Quintana and Fuentes, to Los Angeles with a load of gunpowder for the weapons previously smuggled into the pueblo. The two men earn the wrath of the Eagle for suggesting that Zorro may upset the plan, and they fearfully head off on their mission.

Captain Monastario's latest plan is to discredit Zorro by having a prisoner who killed a man in a sword fight pose as the masked avenger and rob the local landowners at a dinner party.

After the Verdugos return to Monterey, Anna Maria enters their home and discovers that her father is missing. Pablo, their former servant, tells her the old man is being held hostage and will be killed unless she hands over 45,000 pesos believed to be in the house.

Diego overhears Varga telling his aide that the de la Vega hacienda is so comfortable he intends to make it his permanent headquarters. Knowing his father will soon return and would fight to the death to protect his home, Diego decides to try a risky plan to drive the Eagle out.

An emissary from a foreign power has arrived in the pueblo to discuss plans to help the Eagle in his rebellion. George Brighton, the agent, warns Varga that there must not be any open resistance. His government wants an obedient colony, not one torn apart by internal battles. Varga promises to deliver control as planned, but he continues to worry about Don Alejandro and the other landowners who have pledged their allegiance to the King.

Another stranger arrives in the pueblo and travels to the de la Vega hacienda, intending to meet with the Eagle. Diego recognizes the visitor as Count Kolinko, an ambassador from an Eastern European country that has long been interested in controlling California. Since the Eagle has left for the pueblo, Diego manages to convince Kolinko that he is also part of the conspiracy. He almost succeeds in gaining necessary details of the plot.

Magistrado Galindo has smuggled a supply of weapons into the pueblo, intending to use them when the Eagle orders the overthrow of the government, but he has been unable to get a supply of gunpowder. The army has a large stockpile at the cuartel, and the magistrado decides to steal it for his use

Sergeant Garcia and the other soldiers are amazed one morning when every musket seems to misfire. When they check their gunpowder, they realize it has been replaced with charcoal. A search of the cuartel reveals that all of the gunpowder has been stolen, leaving the post defenseless.

Don Alejandro tells Diego he's received a letter from a friend in the capital telling him that the new commandante, Capitan Juan Ortega, has the reputation of being an honest and fair man. When Ortega arrives, he doesn't act that way. He treats Sergeant Garcia with contempt and is openly arrogant toward the civilians. The reason for this is revealed when Ortega meets the magistrado and informs him that the real commandante has been ambushed and murdered, on orders of the Eagle.

Faking Martinez's death, Captain Monastario again tries to use him to impersonate and disgrace Zorro by robbing a church, leaving Zorro confused as to who could be the impostor this time.

Finding that Don Torres is in hiding at the Mission, Monastario forces the local Indians into hard labor until the Padre agrees to surrender the fugitive.

Expecting another shipment of jewels, Murietta goes to inspect the tannery where they will be stored. There, he spots Pasqual, a peasant who lives there, and whips the old man until he leaves. The shipment arrives accompanied by Dolores Bastinado, recently arrived in the pueblo, who attracts the attention of Sergeant Garcia.

The evil work of the Eagle takes a new turn when the commandante's wife, Raquel, visits Quintana and Fuentes and shows them an eagle feather, proving that she belongs to the conspiracy. She informs them the Eagle is furious over the loss of the gunpowder and that they must recover it if they hope to stay alive.

Another stranger with an eagle feather spells trouble for Zorro when Perico, a recent arrival, sees a gypsy girl trying to pay for a purchase with several gold nuggets. Diego and Alejandro realize that news of a gold discovery will cause a rush of "gold fever" and their peaceful way of life will be threatened, so they try to suppress the news.

Captain Monastario finally realizes that Don Diego must be Zorro, and arrests him, but a Viceroy from the King of Spain who is visiting the pueblo turns out to be an old friend of Diego's, and this is just enough to allow Zorro to turn the tables and have Monastario discredited.

Captain Monastario orders Sergeant Garcia to pretend to have been dishonorably discharged, so that the people of the village will take him into their confidence and reveal Zorro's whereabouts.

Diego continues his investigation into Señor Verdugo's business by riding to his house, where Verdugo greets him and Bernardo with his arm in a sling. Although Verdugo claims an old injury is bothering him, Diego suspects he may be the leader of the robbers, so he sets a trap.

Still hoping to strike it rich during his visit to Los Angeles, Estevan shows a great deal of interest in a young woman when he learns she comes from a wealthy family. Don Alejandro accuses Estevan of only being attracted to Margarita because of her money, but the suitor denies the charges, forcing Diego to dress as Zorro in an attempt to frighten Estevan away.

The plans of the fake commandante and the magistrado go awry when Ortega spots Diego talking to Rosarita Cortez, a childhood friend who has recently returned from the capital. Ortega fears she will recognize him from her journey, for it was during that trip that he murdered the real Ortega and assumed his identity. Bernardo overhears the two villains planning her death, and notifies Diego.

Two indentured servants who wish to marry find that the law states they must have the permission of their masters. Buena, who works in the de la Vega hacienda, is told she is free to marry, but her boyfriend, Romaldo, is not so fortunate. One of his co-workers also wants to marry Buena so he convinces their boss that Romaldo plans to run away after the ceremony.

A mystery develops when a teenage girl arrives in the pueblo and asks for directions to a ranch no one has ever heard of. Anita Cabrillo has been studying at a boarding school, and she has come to visit her father, whom she has not seen in many years.

A peaceful protest by a group of peons upset with taxes turns violent when one of the Eagle's men throws a rock through the magistrado's window. Galindo uses this as an excuse to order severe measures against the peasants, a move that upsets Don Alejandro. The other landowners want to set up vigilante posses to punish the peons, but Alejandro argues on the side of reason.

Estevan again becomes a problem for Diego when he decides to earn some easy money. Los Angeles is preparing for its annual horse race and Estevan would like to win the prize money, but his horse seems unlikely to win. His luck changes when he comes across Zorro's horse, Tornado, grazing in a hidden field, and he captures the animal.

The recovering governor is beginning to become irritated by his confinement to the de la Vega home. At times it seems as if the only thing that can pacify him is a music box. Almost as soon as it begins to play, the governor falls asleep. Knowing that the Rebatos are still trying to kill the governor, Diego uses the box to lull him to sleep then Bernardo moves him to safety.

A Chinese boy escapes from a ship in San Pedro's harbor and tries to hide in Los Angeles. He is unable to seek help, for he speaks only his native language.

Diego doesn't know that Ricardo has developed a hatred for Zorro. He makes matters worse when he substitutes a block of wood for a box of chocolates intended for Anna Maria. When she opens her present and Ricardo sees the wood, complete with a carved "Z", he decides to kill his unmask his foe.

It is time to send the tax money to the governor, and Sergeant Garcia has a plan to thwart any attempt to steal the funds during the long journey. He orders the town blacksmith to build a huge iron box that requires a special key to open it. The money will be placed in the box and the key sent to the governor by a separate route.

Don Carlos Fernandez decides to draw Joe Crane into the open by laying claim to the mountain man's furs and burro. Diego tries to end the feud by offering to buy the goods, but Fernandez refuses.

Capitan Arrellanos refuses to help the Rebatos any longer in their attempts to kill the governor. Instead, he chooses another plan designed to make him the head of the government. He asks the governor's daughter to declare her father too ill to continue in office. Furious at this request, Leonar refuses to cooperate. She then tells her father of the aide's plot.

Don Sebastian, a friend of the de la Vegas, is growing impatient at the delay of the stage to Monterey, for he is carrying a purse full of gold and is afraid it may be stolen. While waiting in the tavern with Diego, he makes the mistake of mentioning the gold and is overheard by three crooked entertainers.

A quiet day in the pueblo is abruptly changed when a stranger is killed by an arrow, apparently the victim of an Indian attack. Diego helps Sergeant Garcia inspect the body for clues and finds another mysterious eagle feather, this time on the fake Indian arrow. Other than that, there is no hint as to who the stranger was or why he was killed.

The magistrado's plans to aid the Eagle may suffer a setback when a new commandante arrives in the pueblo. Unlike the fake Ortega, Capitan Toledano is loyal to the King and beyond corruption, yet he must be eliminated if the Eagle's plot is to succeed. Toledano's jealousy over his pretty wife Raquel is the key to the magistrado's newest scheme.

With his father Don Alejandro now charged with treason along with Don Torres, Zorro must see that the judge sent by the governor arrives to assure a fair trial.

The governor of California is attacked during a visit to Los Angeles with his daughter and aide, and barely escapes with his life. Taken to the de la Vega house to recover, he is much too weak to travel for several days. The aide, Capitan Arrellanos, tells Diego he suspects the attack to be the work of the Rebatos, a group that wants to sever ties with the government in Spain.

Capitan Arrellanos continues his attempts to rule California by hiring Carmelo, a recent arrival to the pueblo, to kill the governor. Diego and Bernardo overhear the plan but don't act at once, hoping instead to learn who the other conspirators are. The governor has begun to recover and spends his time sitting outside on the patio, which prompts Don Alejandro to give a party to celebrate his better health.

Don Alejandro remains firm in his wish to send Anita back to Spain and tells the girl to pack her bags. Gonzales arrives to take her to the ship and Anita gives Alejandro a goodbye kiss.

Joaquin and several followers begin a series of raids against the Especials, which culminates with the beating of Capitan Briones. The soldier issues a death order for Joaquin and sends his men after Theresa, intending to force her to reveal his hiding place. She asks Diego to hide her, and with Garcia's assistance, he protects her from the searchers.

Sergeant Garcia returns from escorting Padre Simeon on a trip from San Diego and is surprised to find that almost everyone in Los Angeles has contracted the measles. The doctor has placed the entire pueblo under quarantine and restricted residents to their homes. Even the soldiers cannot leave the cuartel.

Capitan Briones escalates his campaign against Joaquin by ordering that a peon be whipped until he reveals the rebel's hiding place. Zorro uses his own whip to stop Briones, then frees the peon. Shortly after, the real governor returns and Rico explains that his harsh rule was only imposed to make the capital a well-run city. Rico then convinces the governor to offer the rebel a truce so he can explain his case, planning all the while to kill Joaquin as soon as the outlaw turns himself in.