At his ranch, Gene Autry learns that his ranch hands, Fred, Jerry and Bert, have just spent $1,000 of his money to buy a strong but temperamental stallion. Gene then sees his new neighbor, horse breeder Kit Barlow, fly overhead in her airplane, and soon after, she and her trainer, Cal Young, come over to introduce themselves. When they recognize Gene's new stallion as Don Diablo, one of Kit's prize horses, Young opens the corral gate to retrieve him, but he escapes into the nearby mountains. Later, Gene pays Kit $2,000 for Don Diablo, whom he plans to recapture, and then examines the halter the stallion had been wearing. After Gene's cook, Mrs. Pruitt, a matronly lady known as "The Commodore," identifies an unusual seafarer's knot called a "monkey's fist" on the halter, Gene goes to a bridle shop in town owned by his friend, Sam. There, crippled ex-jockey Ted Malloy also identifies the knot, saying that his friend, Droopy Stearns, a recently discharged Merchant Marine, taught him how to tie one. When Gene claims to be looking for a horse trainer, Ted directs him to his brother Rick's apartment, where the unemployed Droopy is staying. At the apartment, Rick notices the halter in Gene's hands, and they both draw their guns. Just then, however, Ted arrives at the door, and Rick begs Gene to put away his gun so as not to upset his brother. After Rick introduces Gene to Ted as the man who "gave" him and Droopy the $1,000 "loan" that Ted used to pay his hospital bills, Gene adds that Rick and Droopy are going to work off the debt by serving as his horse trainers. As soon as Ted leaves, a grateful Rick explains to Gene that Ted became partially paralyzed after a fall from a horse and has not worked since then. Sometime later, at Gene's ranch, Don Diablo appears and is caught by Gene, who, along with Rick, delivers him to Kit. When Rick sees Young there, he punches him without explanation, and Young drives off in a huff. The car noise spooks Don Diablo, who escapes again. By the time Gene returns to his ranch, Sheriff "Jonesy" Jones has arrived to investigate Kit's charge of horse theft. After Jonesy questions Gene and departs, Ted shows up and reveals that he knows that Rick stole Don Diablo and that he and Droopy have fled to the mountains to avoid prosecution. Feeling responsible, Ted asks Gene if he may work off their debt himself. Later, Gene tells Kit that Ted has lost his desire to race and persuades her to allow Ted to train her horse Debutante. Young objects, however, and crushed, Ted leaves. Kit later declares that if Ted returns, she will ask him to ride Debutante in the upcoming Queen's Derby. When Young reminds her that his contract gives him the right to select the jockey, she and Gene give him a post-dated check for $10,000 to waive his rights. Meanwhile, in the mountains, Rick and Droopy capture Don Diablo, and Rick begins to train him to break out of his makeshift corral. Consequently, when Rick returns Don Diablo to Kit's ranch, the stallion breaks out, leading several horses, including Kit's star derby entry, Dame Quickly, to freedom. Rick then offers to retrieve Dame Quickly before the race if Kit drops the charges against him, but Gene informs him that Kit has already dropped them, shaming Rick. Gene uses Kit's airplane to locate the escaped herd and drops a lasso around Don Diablo's neck. Gene has tied a car tire to the other end of the lasso, and the tire eventually becomes stuck between two large rocks and stops the stallion in his tracks. Gene's men then lead Don Diablo and the other horses back to the ranch, where they realize that Dame Quickly has been injured. On the day of the derby, Ted shows up at the racetrack stables, and Gene, Droopy and Rick, who reveals that Young, a former jockey, caused the accident that crippled Ted, persuade his brother to ride Debutante. After a strong start, Debutante places second, and Gene and Kit use the prize money to honor Young's check. After Young leaves Kit's employ, she hires Rick as her new trainer.