As the wagons ride into town, they are framed against the magnificent mountains and the countryside, with the sky filled with dark clouds and thunder - a foreshadowing of approaching trouble. When the homesteaders enter the store, one of Ryker's boys derides the group: "They brought all their women with them to protect 'em." In the store, Marion admires a canning mason jar ("My, my, my, what will they think of next?") Joe looks at a Sears Roebuck store catalogue from the East, full of products that represent manufacturing progress - fine gentlemen's hats and caps, long underwear, etc.

Shane returns Joey's soda pop bottle in the saloon and is again taunted there by poker-playing Calloway who announces "sodbuster" Shane's entry: "Well now, lookey here what we've got. That's one of the new ones. We call him 'sody-pop.'" This time when threatened by Calloway to leave ("Look, pig farmer, you'd better get back inside with the women and kids where it's safe...Did you think you were gonna come in here and drink with the men?"), Shane orders two whiskey drinks and tosses one at Calloway's shirt and one in his face. He then punches Calloway in the face, sending him sailing through the saloon door into the supply store. This provokes one of the most rousing and bloodiest, bar-room fist fights ever recorded on film, as they circle around each other. Hero-worshipping Joey watches in fascination from the side. The real coward Fred Lewis leaves the store fearing the worst: "This is bad, this is bad...This ain't our fight. If we get mixed up in it, we'll all get run out of this country." And the other homesteaders fear retaliation if they join Shane. Shane eventually gets the upper hand by himself, and subdues his bloody-faced, dazed opponent.

Witnessing his brawling skills ("I could use a man like you"), Ryker vainly offers to hire Shane for double what Starrett is paying him but Shane isn't interested and turns him down: "I like workin' for Starrett...It's no use." Ryker can't believe Shane's answer: "What are you lookin' for?" After his first offer fails, Ryker then resorts to insult - he insinuates that Shane is interested in Joe's wife:

Ryker: (musing) Pretty wife Starrett's got.
Shane: Why, you dirty, slinkin' old man!

The second round - a larger fight - develops when Ryker threatens to run Shane out of town ("We're gonna ride you out of this valley, Shane") after being rejected. Joey runs into the scene and cautions Shane: "Shane, come on...But Shane. There's too many." But Shane replies that he won't back down and will stay and face them, even though all of Ryker's men are ready to gang up on him. Shane is soon outnumbered.

Seeing Shane in trouble, Joey runs and informs his father ("the town is gonna kill Shane"), who quickly vows to act like a man alongside Shane ("What Ryker's got comin' to him ain't fit for a woman to see"). The two fight as allies and take on the entire pack, until Grafton pleads for peace and declares the sod-busters the winners: "Stop it! You fools. You've had enough of it. You'll all get killed."

Knowing he has been defeated and that he must raise the stakes, an outraged Ryker sends for a gunslinger. He recruits a cold-blooded hired gun from Cheyenne to bait and kill the helpless homesteaders. He promises a more deadly outcome the next time around:

I'm through fooling, Grafton. From now on when we fight with them, the air is gonna be filled with gunsmoke.

Back at the farm that night after a triumphant fight, the two warrior's wounds are treated by Marion, as she compliments them: "It was ugly and you were both wonderful." Joey watches in awe and admires the two victorious, but bruised fighters - believing that they are invincible and oblivious to pain: "I'll bet you two could lick anyone." Jokingly, Shane blurts out a loud "Ouch" as she brushes turpentine on his forehead. Joey then tells his mother, as she tucks him into bed behind the closed door of his room, of his admiration and love for Shane - within earshot of Shane:

Joey: Mother, I just love Shane.
Marion: Do you?
Joey: I love him almost as much as I love Pa. That's all right, isn't it?
Marion: He's a fine man.
Joey: He's so good. Don't you like him, Mother? (Shane exits from the living room to the outside)
Marion: Yes, I like him too, Joey.

Shane has begun to be almost as important to Joey as his own father, and very attractive to Marion. When she returns to the main living room and looks toward the direction that Shane has taken, she has a dreamy gaze in her eyes and unspoken affection for him. [Is she contemplating following him into the barn?] Unable to trust her own emotions and feelings, she asks her husband to tightly hold her. The family unit is restored as Joey calls out to everyone:

Joe: What's the matter, honey?
Marion: Joe. Hold me. Don't say anything. Just hold me - tight. (They enter their bedroom together and close the door.)
Joey: Goodnight, Mom.
Marion: Goodnight, Joey.
Joey: Goodnight, Pa.
Joe: Goodnight, son.
Joey: Goodnight, Shane!

And then on Independence Day, Ryker's evil, mean, murderous, merciless, hired gunman Wilson (Walter Jack Palance in the credits), with ominous music, rides into town (purposely on a small horse to accentuate his badness). Wearing a diabolical black hat, vest and two guns, he is tall and serpentine, and walks with jangling spurs. When he peers over the swinging saloon doors, even the saloon dog looks up and quickly slinks out of his way. Wilson enters and after an immediate dissolve, is a few steps further along (and filmed from the waist down) - until he walks out of the frame. He announces that he has been summoned by Ryker, who is upstairs and asleep in a room above the saloon. Appropriately, Wilson drinks black coffee from a dark black pot. Wilson has been hired to enforce cattle interests against the determined homesteaders in the valley led by Starrett.

To provoke more conflict in the range war, Ryker's cowhands kill Ernie Lewis' sow and terrorize his family: "Kept shootin' and yellin' what they'd do next. Woke up the kid and scared the missus half to death." He decides to call it quits - using a poker analogy: "I said I'd stay for one more hand. This is it. I've had enough of Ryker." And on Independence Day, Ryker's cattle herds are deliberately directed onto the pig farmer's land to trample the "plowed ground." The ineffectual anger of his neighbor Torrey builds toward the Rykers: "Starrett and the rest of us are gonna take the juice out of him (pause) one of these days." The fences of Mr. Wright and Mr. Shipstead have also been cut as further provocations. While Shane is tightening up the Starrett's barbed wire fence, Joey questions what Shane would do if he confronted the culprits, but Shane dodges the macho question:

Joey: What would you do if you caught them cutting our fence?
Shane: Well, I'd ask 'em to please go around by the gate.
Joey: Aw, Shane.

On the Starrett farm, Marion has opened an old trunk in her bedroom to look for a suitable dress for the day's celebratory party. She discovers her tissue-wrapped wedding dress and lovingly takes it out. Not satisfied with Shane's earlier answer, Joey again asks Shane in the barn why he doesn't wear his six-shooter. [Note the film's second major blooper - through the open barn door, notice the dark-colored vehicle in the far distance moving from left to right just above the top vertical fence post]. Joey confesses how he was mesmerized by the weapon:

Joey: Why don't you ever wear your six-shooter, Shane?
Shane: Well, I guess I don't see as many bad men as you do.
Joey: ...I saw your gun in there one day. I took a look at it.
Shane: (taken aback and slightly stunned) Oh.
Joey: Are you mad?
Shane: No, I guess not. If I were you Joey, I'd leave a thing like this alone.
Joey: I wrapped it up careful in the blanket again.
Shane: Well, that's a good boy.
Joey: Could I see it again? You promised you'd show me how to shoot. (pleading) Please!

In one of the key scenes of the film, Shane agrees to teach Joey how to shoot (after his father admitted earlier that he was too busy to teach him). Shane lectures the boy on the proper positioning of his play wooden gun and holster and the preferences of different gunfighters ("most of 'em have tricks of their own"):

Shane: One, for instance, likes to have a shoulder holster. Another one puts it in his - the belt of his pants. And there are some who like two guns. But one's all you need if you can use it.
Joey: Which is the best way?
Shane: What I'm telling you is a good a way as any and better than most.

He then demonstrates his quick-draw ability and how to accurately pick off a white rock in the distance. The gunfire is deafeningly loud as he pummels it with bullets. Joey's eyes widen and he whistles between his teeth: "Gosh Almighty. That is GOOD!" Marion, standing quietly in the background wearing her full-skirted silvery-white wedding dress, has a concerned look on her face as she witnesses his prowess. She interrupts and criticizes him for initiating her young boy into young manhood by passing on his values. She resists Joey's move toward growing up. Shane defends learning about guns, explaining how he uses restraint:

Marion: Guns aren't going to be my boy's life.
Joey: Why do you always have to spoil everything? (Joey kicks the white rock and points his pistol at it, imitating Shane's behavior: "Bang, bang.")
Shane: A gun is a tool, Marion. No better and no worse than any other tool - an axe, a shovel, or anything. A gun is as good or as bad as the man using it. Remember that.
Marion: We'd all be much better off if there wasn't a single gun left in this valley - including yours.

At that moment, Joe arrives at the homestead and is charmed by the sight of his wife wearing her wedding dress ("Well, look at that woman...!"). In town, rowdy townsfolk celebrate the holiday with a rodeo. At a saloon table with Wilson's back to the camera, Ryker concedes that he has kept things gun-free up to this point: "You know I want to be reasonable, but something's got to give...Look, I've gone along with the new law - I've stayed away from gunplay. Yeah, sure, I've kind of buffaloed the sodbusters, but you've got to admit, Sam, my men have kept their six-guns cased." Sam Grafton glances at Wilson, now shot from the front, and asks: "And now?"

During the holiday's festivities, Torrey enters town for a drink in the saloon. To display his courage with a bold toast, he accuses Ryker of successfully running off Ernie Lewis - one of the homesteaders. He calls it "a downright dirty shame. That's all he had and he worked hard for it." Feisty, Torrey boasts that he is not a coward: "He's runnin' because he's a coward. And here's to me cause I ain't a coward and you ain't gettin' my claim. You can't scare me any more than you can Joe Starrett..." Torrey proposes another toast "to the independence of the greatest state in the Union - here's to the independence of the sovereign state of Alabama." After being allowed to courageously bluster about his lack of cowardice, Torrey breaks some of the louvred panels on the swinging saloon door as he exits. (The splintered opening of the panel frames the faces of the three leering gunmen.)

The horizontal panels dissolve into the red and white stripes of a waving American flag. The early settlers celebrate with fireworks and square dancing. Torrey (the "Reb") arrives late and drunk to the Fourth of July party (the celebration of US independence) that coincides with the 10th wedding anniversary of the Starretts, symbolic of their populist status as homesteaders in the new democracy. [Brown-attired Joe dances with Marion, but in the same dance after a few brief cutaways, it appears that a blue-attired Shane has taken her as a partner, and Joe is dancing with a younger woman.]

Under a curved tree branch with his wife attired in her wedding dress, Joe testifies to the group as the couple's marriage anniversary is honored: "I gave up my independence ten years ago today - but no man ever gave it up as easy as I did - and what's more, I wouldn't trade places with any man in this world." After they kiss, the settlers sing Abide With Me. In Joe's arms, Marion looks back at the other two men in her life - Shane with his arm around Joey's shoulder. During the double celebration, Shane dances with Marion to the authentic square dance tune of "Put Your Little Foot." "Fenced out," Joe oddly senses the mutual attraction growing between them.

During a break, Torrey brags about his encounter with Ryker and a gunfighter in town, described sketchily: "Packs two guns, kinda lean, he wears a black hat." Shane instantly identifies the gunfighter from the Cheyenne area: "There's a man named Wilson that looks like that...If it is Wilson, he's fast - fast on the draw. You should be careful with him." Fred Lewis presents the obvious conclusion: "What's a gunman like Wilson doin' around here pal-in' around with Ryker?"

When they return home tired from the day's celebration in the moonlight, Morgan Ryker is inside the front gate to the Starrett's farm ("I'll open the gate for ya"). Mounted on horses inside their property line, Ryker (with Wilson) attempts one final conciliatory and reasonable gesture. He cordially greets them ("Howdy Starrett. Ev'nin' ma'am") and offers to hire Joe on at top wages. Ryker supports the rancher's point of view, sitting astride his horse, and bargains to buy out the Starrett homestead:

You can run your cattle with mine. What's more, I'll buy your homestead. Set a price you think is reasonable and you'll find me reasonable. Is that fair?

Joe is provoked to anger: "You've made things pretty hard for us, Ryker, and us in the right all the time." In the background, Shane and Wilson quietly stare at each other, and size each other up during the entire scene.

Ryker then eloquently argues how the ranchers discovered the land, opened the West at great sacrifice, survived hard times, fought Indians and rustlers, won the land and tamed the valley with sweat and bloodshed:

Ryker: Right? You in the right! Look, Starrett. When I come to this country, you weren't much older than your boy there. And we had rough times, me and other men that are mostly dead now. I got a bad shoulder yet from a Cheyenne arrowhead. We made this country. Found it and we made it, with blood and empty bellies. The cattle we brought in were hazed off by Indians and rustlers. They don't bother you much anymore because we handled 'em. We made a safe range out of this. Some of us died doin' it. We made it. And then people move in who've never had to rawhide it through the old days. They fence off my range, and fence me off from water. Some of 'em like you plow ditches, take out irrigation water. And so the creek runs dry sometimes. I've got to move my stock because of it. And you say we have no right to the range. The men that did the work and ran the risks have no rights? I take you for a fair man, Starrett.
Joe: I'm not belittlin' what you and the others did. At the same time, you didn't find this country. There was trappers here and Indian traders long before you showed up and they tamed this country more than you did.
Ryker: They weren't ranchers.
Joe: You talk about rights. You think you've got the right to say that nobody else has got any. Well, that ain't the way the government looks at it.
Ryker: I didn't come to argue. I made you a fair proposition.

Dismounting, Ryker appeals to Joe's young boy: "How do you feel about it, son? Wouldn't you like to go partners with me? I don't want trouble with your father. We don't want anyone to get hurt." Starrett refuses Ryker's offer of partnership, and dismisses the offer to his son: "Joey ain't quite of age, Ryker." The stoic farmer believes that the homesteaders have the law, the government and culture behind them. Ryker hurriedly leaves, with a final word: "I don't want you to be sorry, Starrett. I'll see you." With an evil smile, Wilson backs his horse out of the yard.

The next scene is in town the next day, where Ryker vows that he may need to kill Starrett, although he is reminded that the deed would be accomplished by Wilson: "You mean I'll kill him if you'll have to." The Rykers consider baiting and luring Starrett into thoughtlessly coming to town so as to provoke him, easily confront him and murder him. During the dark, storm-clouded, thunder-rumbling day, an opportunity to "get on with it" presents itself with arrival of their first mindless victim (Torrey), as Wilson reasons: "Why don't we just gun him and get on with it. One's run already. It won't take much to stampede the rest." Although Ryker gives permission, he reminds Wilson of his own narrow code of law: "We got to make this look right to Grafton."

Riding into town, "Stonewall" Torrey is accompanied by Swedish homesteader Shipstead (Douglas Spencer) who has an errand to perform at the blacksmith's shop. Thunderclouds again signal an ominous happening. Hanging out on the boardwalk of Grafton's porch above the muddy street, Wilson challenges, provokes, and taunts the proud, hot-headed ex-Confederate Torrey who is determined not to be pushed around. Torrey must slog through ankle-deep mud in the town's street to get to the raised wooden porch to answer Wilson:

Wilson: (to Torrey) Hey! Come here!
Shipstead: Torrey, I wouldn't go over there, Torrey.
Torrey: Nobody's gonna buffalo me. (To Wilson) What can I do for ya?
Wilson: And where do you think you're goin'?
Torrey: To get a whiskey.
Shipstead: Torrey. Torrey. (Thunderclaps sound) Torrey. (Wilson towers above Torrey on the boardwalk as he walks along next to Torrey in the mud and prevents him from stepping up)
Wilson: They tell me they call you 'Stonewall'.
Torrey: Anything wrong with that?
Wilson: That's just funny. I guess they named a lot of that Southern trash after old Stonewall.
Torrey: (taunting) What'd they name you after, or would you know?
Wilson: (while casually putting a black glove on his shooting hand) I'm sayin' that Stonewall Jackson was trash himself. Him, Lee and all the rest of them Rebs. You too.

Tottering in the mud below Wilson, the diminutive Torrey retaliates angrily, standing up to the evil, cold-blooded mercenary: "You're a low-down lyin' Yankee." Wilson challenges him with the enticement:

Prove it!...

Torrey is tricked into drawing on the deadly gunfighter before being brutally gunned down in the one-sided gunfight. Torrey half-draws his weapon but is beaten and senses death - Wilson pauses after outdrawing him, and then pulls the trigger with a deafening gunblast. [Wilson enjoys killing people in cold blood, by choosing easy targets for legal murder, and luring them in.] In a powerful death scene, Torrey is propelled and jerked backwards and his back slams into the thick mud. A cowhand adds his footnote comment: "One less sodbuster." After witnessing the tragedy, Torrey's horrified partner Shipstead is warned by Morgan Ryker:

Get him out of here. Then you can go back and tell your friends we'll be waitin' right here for any more of them that comes in lookin' for trouble.

Shipstead drags Torrey's body out of the mud and slings his corpse on a horse to be carried back to the homesteaders. He informs Starrett: "The new man that works for Ryker did it." As predicted, Starrett is intent on going to town alone, but Marion and Shane warn him of his shortsightedness: "Don't you go alone." The Lewis family prepares to leave, fearing more bloodshed, even before Torrey's funeral: "We're goin' on. I've had enough." But they are convinced to linger long enough to see "Stonewall get a Christian burial."