As soon as Don Diego and Bernardo arrive in Monterey to look into an import business, they are attacked and robbed by two men who expected them to be carrying a large amount of money belonging to the investors who sent them. Because a number of investors have been robbed on the road, they had decided not to bring the money yet.

Diego sets a trap by telling Verdugo that the people bringing the investors' money will be coming to Monterey via the Guadalupe trail, when in fact they are supposed to be using the Camino Real. Unfortunately, Garcia and Reyes, who are bringing the money, decide they will try to outsmart the robbers by taking the Guadalupe trail instead, therefore falling ...

Senor Verdugo, whom Diego now realizes is trustworthy, agrees to deliver the investment money to San Francisco, along with Garcia and a newly arrived lieutenant sent to accompany them. Unknown to all of them, however, is that the real lieutenant was ambushed and the impostor posing as him is actually working with the robbers.

Anna Maria arrives at her house to find it ransacked, and that her father has been kidnapped and held for ransom. The treacherous servant Pablo tells her that he will be released for 45,000 pesos. Fearing for her father's life, she refuses to tell Diego, though he suspects what is going on.

Against Diego's advice, Romero persuades Anna Maria to agree to the kidnapper's insistence that she meet them for proof her father is alive. When they arrive, however, the kidnappers take Anna Maria hostage instead, and send her father and Romero back for the ransom money. When they return to Monterey for the money, Don Alejandro, who has arrived in town ...

Monterey's new acting governor issues a proclamation forbidding the peones from keeping stands in the Plaza.

Acting governor Luis Rico and his men grow more and more desperate to capture the fugitive Joaquin Castenada as the population of Monterey grows more and more tired of the ever increasing new regulations.

Alerted by Don Alejandro, the governor returns to Monterey. However, Luis Rico manages to convince him of his goodwill and innocence in the troubles that have plagued the town in his absence.

Joaquin tries to avenge the attempted ambush by killing Rico and the Governor, but he and Theresa are both caught, and Rico makes Joaquin an offer---to spare Theresa's life if Joaquin will kill the Governor.

In Monterey, Diego and his friend Ricardo del Amo both serenade Anna Maria Verdugo. However, Ricardo is an incurable practical joker, and the practical joke he then plays on Diego has "boy who cried wolf" repercussions.

Ricardo del Amo's practical jokes do not endear him to the humorless Commandante, and when his next joke involves him impersonating Zorro, it leads to him being sentenced to hang.

Still feeling that he is in competition with Zorro, and Diego, for Anna Maria's affection, Ricardo publicly challenges Zorro to a duel in the hopes of unmasking him.

Hoping it will work to his advantage in getting Anna Maria to choose him, Ricardo persuades the Governor to offer amnesty to Zorro if the masked man will reveal his identity. Diego decides to accept the offer so that he may marry Anna Maria himself. But a mysterious stranger in black then holds Diego and Bernardo hostage.

Romaldo and Buena, two indentured servants, want to get married, but must have the permission of their masters. Don Diego, Buena's master, gives his permission, but Romaldo's master Don Tomas does not. Diego must talk Romaldo out of his idea of running away with Buena. But Don Tomas's vaquero wants Buena for himself and lies and schemes to frustrate the young lovers' ...

A blacksmith has constructed a huge iron box that will be used to transport the town's tax money to the Governor. He has also made a large lock and key. The key is mailed to the Governor ahead of time. Unfortunately, the blacksmith's son is romantically involved with a woman who, unbeknown to him, is working with thieves who intend to steal the money, and plan to use...

Diego's uncle, Estevan de la Cruz, arrives at the de la Vega hacienda and throws a lavish party to celebrate his arrival. At the celebration, he tries to sell jewels to several visitors. Diego suspects that the jewels, which Estevan says he bought in Spain, are actually fake.

Tornado goes missing from his stall, and though Diego, Alejandro, and Bernardo go searching for him, he is found by Estevan, who keeps him and plans to use him to win money in a race and then to find and collect the reward for Zorro's capture.

Estevan announces his engagement to Margarita Cotazar. Knowing that his gold-digger uncle is interested only in her money, Diego determines to stop him, as Zorro.

Consistently frustrated by Zorro in his attempts to court and marry Margarita, Estevan tells Diego he is giving up and leaving for Spain, but he actually has one final plan left.

A severe drought has affected ranchers both big and small. Unfortunately, big rancher Don Hilario will not allow smaller ranchers like Miguel Roverto to use water from his ranch, as he has been forced to sell off his own cattle for half price. When Miguel's house burns down because he had no water with which to put it out, he blames Don Hilario for it.

Anita Cabrillo comes to Los Angeles looking for her father, whom she has not seen in twelve years. But nobody in town has ever heard of her father or his hacienda. Diego invites Anita to stay at the de la Vega hacienda until the mystery can be solved.

To show she is telling the truth about her claim that her father wrote her from Los Angeles, Anita looks for the letters he wrote, but cannot find them in her bags and claims they were stolen. Diego suspects that somebody has been deliberately deceiving her, and that the attempts to get her to return to Spain are part of an effort to cover up the truth.

Don Alejandro is about to tell Anita she must return to Spain until he notices the brooch she is wearing. Anita says her father sent it to her from Los Angeles. Alejandro recognizes it as having belonged to Diego's mother and remembers giving it to the church for auction after her death. Diego and Alejandro realize that if they can determine who bought the brooch at...

Rough, crusty American mountain man Joe Crane wanders into Los Angeles, and immediately manages to offend many Spanish with his crude manners, and also with his straightforward approach to a barmaid. A landowner challenges him to a duel, and is quickly beaten and humiliated, but thus vows to kill the mountain man. Garcia jails Crane for entering Spanish territory with...

After escaping from jail mountain man Joe Crane hides out at barmaid Carlotta's house. Garcia and his lancers barely miss finding him there, but a worse problem for Crane is that Don Carlos and his bodyguard have brought a vicious half-breed wolf to search him out.

Joe Crane again hides out at Carlotta's house, not intending to go on his way until he has retrieved his furs from the jail in town. What he doesn't know is that Garcia has sold the furs to Don Carlos, who plans to use them as bait to catch Crane and kill him.

The king's emissary Andres Basilio arrives in Los Angeles and immediately alienates everyone with his arrogance. He interrupts the celebration of Garcia's birthday party, impugning the loyalty of all for having fun while Spain is at war, and throwing Garcia's piñata in the trash. He also demands that everyone in town buy bonds to finance the war, and places outrageous...

Basilio decides to keep the gold he has collected from the area landlords rather than ship it to Spain for the war effort as he is supposed to do. To cover up for his deceit he rigs a contraption to cause an explosion on the ship that was to carry the gold, so that it will be lost at sea. Zorro has to stop this from happening.

In another attempt to obtain wealth for himself, Basilio uses Garcia's dreams and an obsolete law in order to convict Moneta's father of treason--for owning property bought from countries other than Spain.

Basilio tries once again to use Garcia as bait to capture and kill Zorro. When this fails, he decides that Bernardo is the key to Zorro's capture.

A professional swordsman, hoping to extract a large payment from the de la Vega household in exchange, provokes Don Diego into hitting him, and then challenges him to a duel. Diego is thus caught between appearing to fight clumsily and thus risking his life, or fighting as the expert that he is and thus risking giving away his identity as Zorro.

Upon returning to town with Padre Simeon, Garcia finds almost the entire town, including his lancers, quarantined due to the measles. The padre has brought back a golden chalice, which he shows to his ex-convict servant, who then decides to steal the chalice and take advantage of the quarantine to cover his tracks and escape.

After the Governor is injured in an apparent attack while traveling in Los Angeles, he appoints his aide, Captain Felipe Arellano, as acting Governor while he recuperates. But Arellano starts to yield to temptation when a man suggests that his new title might become permanent if the Governor were to die.

While the Governor recuperates in the de la Vega hacienda, Arellano tries to talk his daughter into signing a statement declaring him incompetent. When she refuses, he again considers the proposal of the Rebvatos who want the Governor dead.

Knowing that another attempt will be made against the Governor's life, Diego proposes that a party be thrown in his honor, hoping to force the conspirators' hand and expose them. But Arellano complicates matters by persuading Leonar that it be a masquerade party.

Arellano and the Rebatos plan once again to kill the Governor. Diego and Alejandro are aware of their plans but Diego decides bot to act until they can get all of the Rebatos together so that they know who they are.

Garcia is asked to guard a pouch containing a large amount of money belonging to a friend of Don Alejandro's. However, a fortune teller, who is working with two thieves, uses her wiles to manipulate the sergeant so that she and her friends can obtain the money.

Garcia and Reyes find a Chinese youth hiding in a merchant's warehouse. The youth can only speak Chinese and thus cannot communicate with anyone in town, though Bernardo, through sign language, learns that he had been a prisoner on a ship. Diego brings something the youth wrote in Chinese characters to a priest to interpret. But an American seaman arrives and claims ...

Bernardo finds a young woman, unconscious, after she has been robbed and her carriage overturned. When she comes to, she thinks Bernardo is the one who attacked and robbed her. What's worse, when her servant who was riding with her is found, he also identifies Bernardo as the one who robbed them. It will be up to Zorro to bring out the truth.