Red Ryder returns to Sioux City, Wyoming, at the close of the Spanish-American War, settling down at the ranch of his aunt, The Duchess, with his pals Little Beaver and "Blizard". But Red soon discovers that the country is over-run by rustlers. Unknown to Red and the citizens, the rustlers are led by the town doctor who tips them off where and when to stage a profitable raid. The lucrative racket is threatened when a band of homesteaders, headed by Tad and Bess Glazier, move into the territory and plan to settle in Lava Basin. In good faith, the ranchers tell the nesters that the basin is the stronghold of the outlaws but the settlers regard it as a trick to scare them out. The rustlers add fuel to the simmering ill-feeling between the two factions, and 'Doc' Cole has Ryder framed to make it appear he is the outlaw leader. Plus, the good doctor gets Red framed as being the leader of the rustlers, so a lot of action and plot takes place before "THE END" card sets on Republic's last Red Ryder film.