In 1821, Don Diego de la Vega, a California nobleman, fights against soldiers in the Mexican War of Independence as Zorro, a mysterious masked swordsman who defends the Mexican peasants and commoners of Las Californias. Don Rafael Montero, the corrupt governor of the region, learns of De La Vega’s alter ego and attempts to arrest him. De la Vega’s wife Esperanza, who Montero was in love with, is killed during the ensuing scuffle. Montero imprisons de La Vega and takes his infant daughter, Elena, as his own before returning to Spain.
Twenty years later, Montero returns to California as a civilian, alongside Elena who has grown into a beautiful woman and resembles her late mother. Montero’s reappearance motivates de La Vega to escape from prison. He encounters a thief, Alejandro Murietta who, as a child, saved Zorro’s life during his last fight. De la Vega decides that fate has brought them together, and agrees to make Alejandro his protégé, grooming him to be the new Zorro. Alejandro agrees to undergo de La Vega’s training regimen in Zorro’s secret cave underneath the ruins of his family estate in order to be able to take revenge on Captain Harrison Love, Montero’s right-hand man, who was responsible for killing Alejandro’s brother, Joaquin.
While still being trained, Alejandro steals a black stallion resembling Zorro’s steed Tornado from the local garrison. De La Vega scolds Alejandro, claiming that Zorro was a servant of the people, not a thief and adventurer. He challenges Alejandro to gain Montero’s trust instead. Alejandro poses as a visiting nobleman named Don Alejandro del Castillo y García, with de la Vega as his servant, and attends a party at Montero’s hacienda. At the party, he gains Elena’s admiration and enough of Montero’s trust to be invited to a secret meeting where several other noblemen are present. Montero hints at a plan to retake California for the Dons and proclaim it as an independent republic by buying it from General Santa Anna, who needs money for the upcoming Mexican–American War.
Montero takes Alejandro and the noblemen to a secret gold mine known as “El Dorado,” where peasants and prisoners are used for slave labor. Montero plans to buy California from Santa Anna using gold mined from Santa Anna’s own land. De la Vega uses this opportunity to become closer to Elena, though he identifies himself as “Bernardo” the servant, learning that Montero told Elena that her mother died in childbirth. While walking in a market, Elena meets the woman who was her nanny who tells Elena her parents’ real identity. De la Vega sends Alejandro, succeeds the former as Zorro, to steal Montero’s map leading to the gold mine. Zorro duels Montero, Love, and their guards at the hacienda. When Zorro escapes, Elena attempts to retrieve Montero’s map from the swordsman, but he seduces her, leading to a passionate kiss before he flees.
Terrified of Santa Anna’s retribution if he discovers that he is being paid with his own gold, Montero, at Love’s urging, decides to destroy the mine and kill the workers. De la Vega tells Alejandro to release the workers on his own so that de La Vega can reclaim Elena. Alejandro sets off, feeling betrayed by Diego’s vendetta. De la Vega corners Montero at the hacienda and reveals his identity, but Montero captures him by threatening to shoot him in front of Elena. As he is taken away, de la Vega tells Elena the name of the flowers, romneya, she recognized upon her arrival in California, convincing her that he is her father. She releases de la Vega from his cell and they proceed to the mine, where Alejandro and de la Vega respectively defeat and slay Love and Montero, avenging both Joaquin and Esperanza. Elena and Alejandro free the workers before the explosives go off, and then find the mortally wounded de la Vega. He makes peace with Alejandro and Elena and gives his blessings for Alejandro to marry his daughter before dying.
Some time later, Alejandro and Elena are married, and Alejandro tells stories to their infant son, Joaquin, whom he named after his brother, of his grandfather’s heroic deeds and legacy as Zorro.