Don Diego learns from a reformed pirate, Bardoso, that a man by the name of Marcos Lopez is cheating the caballeros at cards. Bardoso claims that Lopez is in league with Capitán Torello and that Lopez was sent to the pueblo by the governor to ruin as many caballeros as he could. Bardoso also tells Don Diego that a friend of Don Diego's, Don Carlos Cassara, has been losing heavily against Lopez. During the conversation Bardoso tells Don Diego that Zorro could do something about it and reveals that he is close to José, chief of the Cocopahs, and knows about certain secrets. Additionally, Barbosa states that Capitán Torello is suspicious that a certain caballero is Zorro.
Don Diego visits the inn and persuades Don Carlos to not play against Lopez for 24 hours. After Don Diego leaves the inn, he tells José of the Cocopahs that Zorro will ride that night. Don Diego dresses in his Zorro disguise with the help of Bernardo, his mute servant. Zorro makes an appearance at the inn solely to lure the soldiers into chasing Zorro. The soldiers ride off chasing José. Zorro goes to the presidio where Lopez is playing cards. He confronts Lopez and forces Lopez to play cards against him. Zorro wins back all of the money that the caballeros had lost to Lopez. Zorro fights Lopez and cuts the first two slashes of the Z on Lopez's cheek. During the fight, Capitán Torello notices that Zorro has a large wart on his neck and plans to check later to see if Don Diego has a wart on his neck. Zorro is forced to retreat because the soldiers are coming.
Zorro enters the inn later to find Don Carlos, Capitán Torello, and Marcos Lopez in the main room. Zorro finishes the Z on Lopez's cheek and wounds Torello. Torello tells Don Carlos to fight Zorro, and he does. Zorro knows that Don Carlos is not thinking straight and maneuvers so that he and Don Carlos are away from the other men. Zorro locks swords with Don Carlos and reveals that he is Don Diego so that Don Carlos will stop trying to kill him. Don Carlos allows Zorro to disarm him, and Zorro escapes.

Since Torello suspects that Don Diego is Zorro, he surrounds the Vega home. Don Diego is able to sneak inside and get changed back into his regular clothes. Torello enters the home and demands to see Don Diego. When Don Diego enters the room, Torello is chagrined that there is no wart on Don Diego's neck. Later, Don Diego laughs to himself, for the wart had been a bit of wax fashioned to look like an wart, and he used it to prove to Torello that he cannot be Zorro.