Tyrone Power stars as 19th century nobleman Don Diego de Vega, whose father, the mayor of Los Angeles, is removed from office by the sinister Captain Pasquale (Basil Rathbone), and a new corrupt "alcalde." By day, the crooked politicians rob the citizenry at every turn, and at night, Don Diego, wearing a mask, defies their laws and avenges the innocents. As he leaves his trademark - the letter "Z" - wherever he goes, he also leaves an impression on the mayor's niece (Linda Darnell), who can't help but love the hero in disguise.

Posing as a foppish coward, Diego, a Spanish nobleman, fights injustice in colonial California. Upon his return from Spain, Diego realizes that Captain Pasquale is terrorizing the district and levying unreasonable taxes. Disguised as Zorro - a masked Robin Hood-like swashbuckler - the young Spaniard menaces the local authorities to the delight of all the peasants. In the meantime, posing as the inept fop, he is able to move through society without being suspected.