Sir Robin lays down his own laws - he promises rebellion against anyone who offers allegiance to the "traitorous" Prince John and denounces his plans to usurp the throne. He warns the Normans that he will take a Norman life for each Saxon life:

Robin: What else do you call a man who takes advantage of the King's misfortune to seize his power? Now, with the help of a sweet band of cutthroats, you'll try to grind a ransom for him out of every helpless Saxon, a ransom that will be used not to release Richard but to buy your way to the throne.
Sir Guy: Let me ram those words down his throat, your Highness!
Prince John: Oh no. Later. Let him spout for a moment. (To Robin) And what do you propose to do?
Robin: I'll organize a revolt, exact a death for a death, and I'll never rest until every Saxon in this shire can stand up free men, and strike a blow for Richard and England.
Prince John: Have you finished?
Robin: I'm only just beginning. From this night on, I'll use every means in my power to fight you!

One of John's henchmen aims his spear at the back of Robin's chair, missing him as he dodges to the side at the last instant. Robin overturns the chair backwards, uses it as a shield, and then draws his sword and fights off the castle guard as they attempt to seize him. He sends forth a deadly accurate flurry of arrows from his bow, keeping his pursuers from following him out the large hall's great doors. With acrobatic agility, he escapes into Sherwood Forest on a waiting horse with Will Scarlet and Much the Miller's Son.

Robin is officially declared and branded a rebellious outlaw. His possessions are to be forfeited to the crown, his title is taken away, and Prince John vows to make the people who support Robin feel the pressure by mercilessly collecting the ransom with the most brutal means possible. The arrogant Sir Guy is presented with a death sentence for Robin and promises:

I'll have him dangling in a week.

Robin is committed to rebellion and proceeds to recruit a band of followers from Nottinghamshire. In a legendary moment in the forest, red-clad Will Scarlet watches Robin tackle the boisterous Little John (Alan Hale, who played the same role in the 1922 silent film version). They meet in the middle of a narrow log footbridge spanning a stream and engage in a hilarious quarterstaff jousting duel. Robin is beaten by his opponent and dunked during the bout, but afterwards makes Little John his chief lieutenant. After being defeated, Robin comments: "I wanted to see what you were made of, and I did."

The word is spread from ear to ear that Robin will meet with the peasants in Sherwood, encouraging them to band together to revolt against the oppression:

I've called you here as freeborn Englishmen, loyal to our king. While he reigned over us, we lived in peace. But since Prince John has seized the regency, Guy of Gisbourne and the rest of his traitors have murdered and pillaged. You've all suffered from their cruelty - the ear loppings, the beatings, the blindings with hot irons, the burning of our farms and homes, the mistreatment of our women. It's time to put an end to this! (Cheers.) Now, this forest is wide. It can shelter and clothe and feed a band of good, determined men - good swordsmen, good archers, good fighters. Men, if you're willing to fight for our people, I want you! Are you with me?

The men enthusiastically rally to his call for resistance to the oppression and tyranny of the Prince, becoming his Merry Men of Sherwood by kneeling and swearing to this oath:

That you, the freemen of this forest, swear to despoil the rich only to give to the poor, to shelter the old and the helpless, to protect all women rich or poor, Norman or Saxon. Swear to fight for a free England. To protect her loyally until the return of our King and sovereign Richard the Lion Heart. And swear to fight to the death against our oppressors!

Another historical description summarizes the reign of terror and brutality waged by Prince John:

But Prince John's reign became even more murderous. Terror spread among the helpless Saxons who knew that resistance meant death. Soon death became preferable to oppression and the defiant oath became more than a thing of words.

Robin's elusive men use black arrows to kill and strike down the evil, villainous Prince's men who continue to oppress the common people with hangings, theft and cruelty. One black arrow bears a warning, and strikes the table where the Sheriff and Sir Guy are plotting more brutal extortion with cruel tax collectors.

In a light-hearted moment, Robin steals a leg of mutton from a jovial, pious, fat Friar Tuck of Fountain's Abbey (Eugene Pallette) sleeping at the foot of a tree by a stream. At the point of a sword, Robin teaches him "obedience" and forces the rotund cleric to carry him piggyback in a shortcut across the stream. Halfway across, the friar dumps Robin over his head into the water, and they break into a lively broadsword fight.

Friar Tuck, like Little John, is recruited into Robin's band of Merry Men in Sherwood Forest, promised all the food he can ever feast on in the greenwood. Little John notices the friar's round girth:

Little John: He's well named Friar Tuck. It would take half the deer in Sherwood Forest to fill that cabin.
Tuck: And twice that to fill your empty head!

Will rides up and is assured that the new recruit is one of them. Will responds: "One of us? He looks like three of us."

Will alerts Robin and his men to the next day's rich, but well-armed Norman caravan transporting tax money to London. It was collected to fill the private coffers of Normans rather than to pay the King's ransom. The small army, led by Sir Guy, will pass through the impenetrable Sherwood Forest on its way to London and Nottingham. Robin and his outlaws plan an ambush to waylay the treasure caravan. At a signal, Robin's Merry Men appear out of bushes, fly out of trees on camouflaged vines, swoop and dive down to the ground and bloodlessly subdue Sir Guy's retinue. After swinging from a treetop, Robin delivers another welcome to Maid Marian, who has accompanied the Norman column, riding on a palomino horse [called Golden Cloud - that later became Roy Rogers' horse Trigger]:

Welcome to Sherwood, my lady!

Apparently, Robin has put himself in the path of danger to also encounter the Maid Marian, with whom he has fallen in love. As Gisbourne and the Sheriff are led away, Sir Guy threatens that Robin will hang for his insolent actions. Robin gallantly informs Sir Guy that courting Lady Marian is worth the risk:

Hanging would be a small price to pay for the company of such a charming lady.

Marian is scornful of him and his charm: "What can a Saxon hedge robber know of charm - or ladies?"

The two captive prisoners are forced to dress in poor rags - they exchange their clothes with the Merry Men. Robin and his men attend a feast at a banquet in the woods. Robin speaks to Lady Marian, his reluctant guest, about the joy he has brought to his band of followers:

Robin: To them, this is heaven. Silks for rags. Kindness instead of riches. Limitless food instead of hunger. Why, they're actually happy!
Marian: Are they?
Robin: Aren't you even a little pleased to see them enjoying themselves?
Marian: I think it's revolting.
Robin: Ha. Your life's been very sheltered, hasn't it, Marian? Too sheltered perhaps. But if you could know these people as I know them, their infinite patience, loyalty, goodness...

A member of Robin's band calls everyone to the banquet table: "To the tables, everybody, and stuff yourselves!" At first, Marian hates him for being a Saxon outlaw, and disdainfully refuses to eat: "I'm afraid the company has spoiled my appetite." At the banquet, Robin pledges to divert the collected ransom funds from the captured group (that the Prince was planning to keep for himself) and pay the ransom for the King.

Robin: Are you really interested in learning why I turned outlaw? Or are you afraid of the truth, or of me perhaps?
Marian: I am afraid of nothing, least of all you.

As she hears and sees more, Lady Marian begins to learn the truth of his activities and the justice of his cause, and her opinion and attitudes toward him soften and change. When shown the once-content and harmless people who are now mutilated and oppressed victims of Prince John's injustice, Marian is more convinced and impressed by his dedication. She witnesses Robin's kindness to the poor, lame and oppressed, and hears their gratitude to him, although he realizes for her that it is "hardly an inspiring sight for such pretty eyes."

Marian (questioning): But you've taken Norman lives.
Robin: Yes, those that deserved it, cruel and unjust.
Marian: You're a strange man.
Robin: Strange? Because I can feel for beaten, helpless people?
Marian: No. You're strange because you want to do something about it. You're willing to defy Sir Guy, even Prince John himself, to risk your own life. And one of those men was a Norman!
Robin: Norman or Saxon, what's that matter? It's injustice I hate, not the Normans.
Marian: But it's lost you your rank, your lands. It's made you a hunted outlaw when you might have lived in comfort and security. What's your reward for all this?
Robin: (surprised) Reward? Just don't understand do you?
Marian: I'm sorry. I do begin to see...a little...now.
Robin: You do, then that's reward enough. (He kisses her hand gently.)

Lady Marian is personally escorted to the castle on horseback with a changed attitude and growing love for Robin, something not unnoticed by the Sheriff. During the forest banquet, Bess (Una O'Connor), Marian's flirtatious yet cronish lady-in-waiting/maid servant develops a romance with Much the Miller's Son.

Sir Guy and the High Sheriff are returned after the robbery, on foot, penniless and in rags - they have been taught a lesson in humility. Prince John is furious when the "two nincompoops" return without the tax money. John vows that Robin must be captured. At the Sheriff's suggestion, they plan to stage an archery contest at Nottingham to outwit and trap Robin. Robin, the finest archer in England, is expected to be the tournament's winner even though he might be disguised. He will be irresistibly drawn to the first prize of a Golden Arrow offered by the hand of Lady Marian, especially with his warm regard for her.

The memorable archery tournament challenge [filmed in Pasadena, California in the old Busch Gardens] opens with a fanfare and parade. On the observation platform, the Sheriff's voices his hope: "I hope our little golden hook will catch the fish." Though Robin is suspicious of their conniving trap, he cannot resist and confidently enters the contest, disguised as a tinker. He wins the preliminary rounds and John and Gisbourne suspect Robin's identity. They close in with guards just before the final round.

At the conclusion of the exciting contest when the target is moved back 20 paces, Robin splits the shaft of his opponent's arrow after the latter makes a perfect bull's-eye. "Godfrey of Sherwood" is pronounced "Champion Archer of England," even though John and Gisbourne know that only Robin Hood could perform such a miraculously-accurate feat. Robin is arrested and almost escapes after putting up a spectacular struggle, but he is dragged from his horse by soldiers and captured.

Gisbourne is responsible for Robin's punishment - the outlaw is sentenced for crimes of:

outlawry, theft, murder, abduction, false pretenses, contempt of the crown, poaching in the royal forests and high treason.

Robin requests other counts be added to the charges: "To love one's country, to protect serfs from injustice and be loyal to one's king." Robin is held in a dungeon awaiting execution the next day in a public hanging in the town square.

A converted ally and troubled by the thought of Robin's execution, Marian arranges to help Robin escape. She learns from Bess that Robin's outlaw comrades can be contacted at the Saracen's Head Tavern, a place they often frequent. Under cover of darkness, Lady Marian meets Robin's men there with a message and a plan for rescue. After convincing them of her sincerity, she warns his men so they can organize and position themselves in the crowd during the execution to facilitate his escape.

The next day, Robin is brought to the gallows in a wagon and prepared for the hanging. At a signal, his men shoot a guard and the hangman after which Robin leaps from the gallows onto a horse (even though his hands are still bound behind his back! - an unbelievable stunt) and gallops through the city. His men block the way of his pursuers with carts and wagons.

At the main city gate after all his men have passed through, Robin cuts the portcullis rope, closing the grating over the entrance. Holding on to the rope, the weight of the closing portcullis swings him up to the top of the gate entrance. Acrobatically, he climbs over the main gate, slides down the rope on the other side, and successfully escapes with his men on horseback. [Note: Flynn used a stunt double for this and the previous action stunt.]