An old opponent of Don Diego's arrives from Spain and tries to steal the army payroll. When defeated by Zorro, he recognizes the fencing style as Diego's and sets out to reveal Zorro's true identity to Sgt. Garcia.

When Don Diego discovers that an old acquaintance plans to elope with a young man who is probably only after her family's jewels, he contrives to delay the wedding until he can confirm his suspicions.

Returning to Los Angeles, El Cuchillo and his men are once again humiliated by Zorro. El Cuchillo then goes to the de la Vega hacienda and holds the family for ransom. Will he discover Don Diego's secret identity?

A group of bandits fleeing Mexico arrive in Los Angeles. Led by the charismatic El Cuchillo (The Knife), they plan to steal a shipment of silver being guarded by Sgt. Garcia.