Don Diego is inquiring for his friend, Don Carlos Cassara, at the inn when he and the landlord hear shrieking; a native is being whipped by a horse dealer. The landlord tells Don Diego that the man buys stolen horses from the natives and then cheats them at cards to win the money back. Don Diego questions the horse dealer and discovers that his name is Felipe Garzo.
Presently, Don Diego walks over to Bardoso's hut. Bardoso tells him that he believes that Garzo is not actually a horse dealer, but rather, someone posing as a horse dealer. He believes Garzo is in Los Angeles to capture Zorro. Garzo purposely beats natives so as to draw Zorro out into the open so that he can be captured. Bardoso is certain that Garzo is in league with Capitán Torello. After Don Diego speaks to Bardoso, he passes by José, chief of the Cocopahs, and tells him that Zorro will ride that night.

At the presidio, Garzo tells Torello that Don Diego took the bait. His manner was mild, but Garzo says there was a certain fire in his eyes. Both men are surprised when Don Diego arrives at the presidio. Don Diego asks for Sgt. Gonzales to escort him to the Pulido hacienda as Don Diego does not wish to travel alone. After Don Diego and Gonzales arrive at the Pulido hacienda, Gonzales goes off to spend the evening with a native woman who works for the Pulidos. Without bothering to enter the Pulido hacienda, Don Diego slips away and meets José. Don Diego puts on his Zorro disguise and spreads phosphorus over his face and upper torso. Zorro wraps his black cloak around himself and heads towards the presidio.

When Zorro arrives at the presidio's guest house, he notices three guards. Zorro walks close to them, removes his cloak, and begins making a wailing noise. The soldiers are terrified to see what appears to be a glowing skeleton which is wailing. Zorro replaces his cloak as Capitán Torello and Garzo appear to see what the trouble is. Neither Garzo nor Torello see a glowing skeleton, and Torello is disgusted with the soldiers and makes them resume their post. During the commotion, Zorro slips inside the guest house. Garzo presently reenters the guest house and lays back down. He turns over and is shocked to see a glowing Z and the word death on the wall. Garzo can't understand where the message came from and thinks he is going mad. Zorro waits until Garzo is asleep before entering the room. Zorro speaks softly, calling Garzo a jackal. Garzo awakens and sees the glowing skeleton. Garzo is terrified and lights a torch. He now sees Zorro and decides to fight Zorro unaided, wishing to gain great glory. The two men fight, and Zorro cuts his Z on Garzo's face. Garzo cries out for the guards, and Zorro hides behind the door. When the soldiers rush in, Zorro escapes. Zorro rides off on his horse to where José is waiting. José gallops off, drawing the soldiers to chase him instead of Zorro.

Don Diego travels back to the Pulido hacienda. He enters the hacienda, telling Don Carlos Pulido that he has been visiting for 2 to 3 hours and is coming back inside after having just stepped out for some fresh air. Don Diego tells Don Carlos that Sgt. Gonzales has been waiting for him all evening and asks Don Carlos to send a servant to fetch Sgt. Gonzales. Don Carlos is confused at first but quickly understands the situation. He asks Don Diego if Zorro has been riding, and Don Diego affirms his suspicion. As Don Diego and Sgt. Gonzales head back to the pueblo, they pass Torello and the soldiers who are on a fruitless hunt for Zorro.