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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.

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.

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 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.

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.

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.

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.

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.

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.

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.

Ramon Santil has just inherited his father's ranch and holdings, and some bad news. The magistrado tells him there's a high tax that must be paid at once or he will lose the land, and Ramon doesn't have the money to pay it. In desperation, he sells all of his cattle to Carlos Urista, a recent arrival in town whom Diego suspects as another of the Eagle's men.

Raquel's ambitious plans for her husband appear to end when she receives a letter from him. She had been promised by the Eagle that he would be made governor of California, but her husband wants her to join him in San Diego, for he plans to sail back to Spain. Realizing the Eagle will not let her go, she tries to sneak out of the pueblo, only to be caught by Quintana.

The story of the masked rider in Old California opens as Don Diego de la Vega is returning to California from Spain, where he has been studying for several years.

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.

Sergeant Garcia receives a mysterious note from Zorro. The happy soldier reads that Zorro will give himself up. When he returns for his sword, it is gone, so he sadly returns to the cuartel without having captured his foe.

Learning that a group of disgruntled landowners plan to seize the cuartel and free the political prisoners, Captain Monastario sets a trap to capture them, including Zorro's father Don Alejandro.

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.

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.

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.

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.

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.

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.

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.

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 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.

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.

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.

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.

Anita is still hoping to find her father, but Sergeant Garcia has decided she is nothing but a liar and wants to send her back to Spain. Only Diego believes her story, and he tells her she needs to supply some proof of her father's existence.

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.

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.

Diego's uncle, Estevan de la Cruz, arrives in Los Angeles for an unannounced visit and surprises the de la Vegas when he tells them he plans to be their house guest. Furthermore, he expects them to give a lavish party to welcome him. All of this angers Don Alejandro, but to head off a family dispute, Diego convinces his father that Estevan will leave soon.

Estevan still hopes to marry the wealthy Margarita but he knows that Zorro will continue to oppose him. Don Alejandro suggests that if Estevan were to settle down and begin farming, Zorro would realize that his intentions are honorable. He gives the visitor a small plot of land and wishes him well in his endeavor.

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.

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.

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.

Los Angeles is suffering from a severe drought and tempers are fraying as crops and animals die from the lack of water. Most of the landowners are helping their neighbors by allowing them access to the few wells and springs that have not yet dried up.

Basilio has begun to enjoy his stay in Los Angeles despite Zorro's interference. He is surprised at how well his war bonds are selling, for the landowners have decided to help support the Spanish government as much as possible.

Pedro Avila, recently arrived in the pueblo, earns a meager living by betting other men that he can beat them in a sword fight. He tries to talk Diego into betting, but Diego refuse, as Diego knows he must keep his skill a secret. This gives Avila and his friend Tony Pineda an idea about how to get rich. They plan to force Diego into a duel, then allow the frightened man to buy his way out of the situation.

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.