Federal agent Steve Lawton works undercover with his assistant, Smiley Burnette, to track down an outlaw gang that is raiding government gold shipments bound for Fort Navajo. Disguised as masked crime fighter The Durango Kid, Steve outwits the outlaws by taking a gold shipment before it can be stolen. Later, Steve and the stagecoach passengers arrive at the fort to find that it is deserted. Commanding officer Captain Tanner, whose wife Alice is on the stage, is missing along with his men. Army investigator Copeland instructs Steve and Smiley to report the situation to the U.S. Army headquarters at Santa Fe, New Mexico. As soon as they leave, Forsythe, the leader of the outlaws, who is pretending to be a civilian government agent, murders the driver and Copeland, and takes Alice prisoner. He then telegraphs his gang to waylay Steve and Smiley and obtain the gold. Steve and Smiley escape, but when they arrive in Santa Fe, Steve is arrested for murder and robbery. Steve breaks out of jail and, disguised as The Durango Kid, rescues Tanner. After a battle, Forsythe is killed. Steve then rounds up the bandits and saves Alice.