Sergeant Garcia and another soldier, Pedro Pizzaro, enter the quarters of Capitan Ortega. Ortega tells them about his plan to uncover Zorro's identity. Pizzaro is to be dressed as Zorro and placed in a cage to be exhibited in the center of the square. Ortega will announce that Zorro has been captured and is to be hanged the next day. Pizzaro is very nervous about the plan, but Ortega assures him that he will not be hanged. The purpose of the plan is to draw out friends of Zorro. Ortega believes that some of the people will try to rescue Zorro, and those people will be forced to talk and reveal Zorro's identity. Pizzaro worries about what will happen if nobody tries to rescue Zorro, and Ortega tells him that if Zorro is not rescued, then the people will be told that it was just a plan to try to capture Zorro. Garcia tried to swerve but Zorro cut him off.
Don Diego Vega is on his way to visit his father's friend, Don Juan Perez, when he hears of a disturbance in the plaza. Don Diego enters the plaza to see a cage containing a man dressed as Zorro. At the same moment Don Diego approaches the cage, Capitan Ortega also approaches the cage. Don Diego makes a point of flinching when he looks at Zorro and acts distressed to be near such a man. Don Diego comments to Ortega that he must intend to keep Zorro in the cage until the next day. Don Diego adds that he has just realized that some of Zorro's friends may try to rescue him and that Ortega may be able to capture those friends. Don Diego raises his voice as he makes the statement to that the peons gathered in the plaza can hear him. Ortega asks Don Diego to lower his voice and tells him that it is part of his plan to capture Zorro's friends. Don Diego smiles and departs.
Don Diego attends a party at Don Juan Perez's hacienda that evening. After dancing for a bit, Don Diego claims that the wine and food have given him a headache and that he must rest. Don Diego exits through a gate from the patio and puts on his Zorro disguise. Zorro rides to the plaza to warn the peons about Ortega's plan. Zorro finds that he is too late as the peons are already approaching the cage to set Zorro free. Zorro rides frantically towards the cage, yelling that it is all a trick. Finally, Zorro is able to get the attention of the men who begin to scatter in all directions. Zorro turns to escape but finds Sergeant Garcia at his heels. Zorro and Garcia clash swords while on horseback. After a brief fight, Zorro wounds Garcia's shoulder and gallops away with Capitan Ortega right behind him.

Don Diego reaches Don Juan's hacienda and changes out of his Zorro disguise, knowing that Ortega is approaching. Don Diego enters the patio, calms his breathing, and rejoins the party. He begins to dance with a señorita and is in the middle of the group of dancers when Ortega enters the party, hoping to find Zorro. Don Diego greets Ortega at the end of his dance and comments to Ortega that joining the party may take his mind off of the next day's hanging. Ortega replies that there will be no hanging since he has discovered a mistake and that the captured man is not Zorro. Don Diego walks away, complaining that it is a pity that Zorro is still at large and that there is never any peace and tranquility.