At Torrey's simple funeral on Cemetery Hill, one of the most moving scenes in the film, the homesteaders have come with their buckboards and covered wagons to the grave site to mourn. The Ryker gang watches the procession from Grafton's saloon porch. The austerity of the town and environment is seen in the background, represented by a single, isolated row of frame buildings, against a deep blue sky and faint purple range of mountains. The cluster of mourning settlers sing Abide With Me, and repeat The Lord's Prayer around the wooden coffin. Torrey's widow weeps and his mongrel dog whimpers and mourns at the side of his owner's coffin and at the gravesite. In tribute, one of the homesteaders plays "Dixie" slowly on a harmonica, followed by a lonely taps. His widow nearly collapses at the conclusion of the ceremony.

A number of the homesteaders, including Fred Lewis' family, decide to leave the area permanently. Starrett tells them why it is so important to stay and band together:

Torrey was a pretty brave man, and I figure we'd be doin' wrong if we wasn't the same...We can have a regular settlement here, we can have a town and churches and a school...We've just got to, that's all...We can't give up this valley and we ain't gonna do it. This is farmin' country, a place where people can come and bring up their families. Who is Rufe Ryker or anyone else to run us away from our own homes? He only wants to grow his beef and what we want to grow up is families, to grow 'em good and grow 'em, grow 'em up strong, the way they was meant to be grown. God didn't make all this country just for one man like Ryker.

When Starrett weakens and appears defeated during his speech, Shane reinforces his proposal with his own words about the importance of families: "You know what he wants you to stay for? Something that means more to you than anything else - your families. Your wives and kids. Like you, Lewis, your girls; Shipstead with his boys. They've got a right to stay here and grow up and be happy. That's up to you people to have nerve enough to not give it up."

Even while they listen, Ryker's men burn Lewis' abandoned farm. But even in the face of more adversity, they decide to hold together and join a fire-bucket brigade at Lewis' place, with new resolve under Joe's leadership. Following the community's commitment to help Lewis rebuild his homestead, he decides to remain, as Starrett commends them on their renewed spirit: "This is for all of us right here in this valley."

From a distance, Ryker fears Joe's influence has turned around the people's attitudes: "Starrett's holdin' 'em together." Facing insurmountable odds and believing that there is no other alternative ("I promise you something's gonna be done about it") other than assuming the role of a gunfighter, a stubborn and determined, normally-pacifistic Joe is persuaded to put on his guns and go to town to kill Ryker ("I made up my mind, I'm gonna have this out with Ryker - if I have to kill him"). He is not swayed by Marion's pleas to change his mind ("You're taking on too much Joe, all by yourself").

As Starrett saddles his horse to confront Ryker, and defeat violence with more violence, Marion begs him to think sensibly: "Joe, you can't do it...Go in town to kill Ryker - he'll kill you." A rapid cut to a conversation between Rufus and Morgan Ryker at Grafton's illustrates the cattle rancher's desperation: "Tell him I'm a reasonable man. Tell him things have gone far enough. Tell him I'm beat. Tell him anything, but by Jupiter GET HIM HERE! He'll come. He thinks he's a reasonable man." He pounds his fist to emphasize the point. Back at the Starrett farm, Marion pleads some more to her pig-headed husband who insists on acting like a man: "Joe, he'll kill you!" When that doesn't work, she implores Shane - who has been teaching young Joey at the table how to tie a "false square knot that won't hold" - to "tell him he can't go. Tell him it won't work, tell him! SHANE!" Calmly, he is non-committal when caught in the middle of their domestic controversy: "I can't tell Joe what's right, Marion." Her emotional request of Joe doesn't even produce a response:

Please wait, Joe. Won't you do even this for me?

Ryker sends Morgan and two gang members (a "peace party from Ryker") to Starrett's place. Although Joe is poised with his own loaded rifle, they invite him to come to Grafton's to "talk" reasonably ("You want to be reasonable, don't you Starrett?"). To make it appear like Starrett will be alone in a meeting with Ryker, Morgan promises that he and his gang are "headin' home" - but it is only a trick. [From a different vantage point, Shane has been covering Joe with his pistol.] Calloway, who has had a change of heart and has quit Ryker's bunch ("I reckon something's come over me"), rides out at the same time and warns Shane in the barn - without Joe's knowledge - that "Starrett is up against a stacked deck." In the background, Joey is heard playing with his wooden pistol: "Bang, bang!"

Resolved to go to town although ultimately knowing his decision is suicidal, Starrett loads his revolver and tells Marion that this is his best chance to stand up to Ryker ("There's no use to argue, Marion, I'm goin' into this with my eyes open"). But she refuses to let him leave without lecturing him about his foolish, masculine "silly kind of pride" to not appear 'yellow.' However, he knows she won't have to worry if he doesn't come back when he alludes to her growing relationship and feelings for Shane:

Marion: Isn't there anything I can say that'll change things?
Joe: Can't you see, honey, maybe this is the chance. Morgan and them boys went home.
Marion: You don't really believe that. That's not the reason.
Joe: It's just too much for me to give up, this place and the valley. All the things that will be.
Marion: Will be. (Joey bolts through the door pointing his pistol and crazily shouting 'Bang, bang' at both of them - reflecting the tensions of their adult argument.) (screaming anxiously) Joey, don't point that thing! Go play outside! Play outside, Joey! (more calmly) Please dear, go outside and play. (Joey exits) It's just pride, that's all, a silly kind of pride. Don't I mean anything to you, Joe? Doesn't Joey?
Joe: Marion - honey, it's because you mean so much to me that I- I've got to go. Do you think I could go on living with you and you thinking that I showed yella. Then, what about Joey? How do you think I'd ever explain that to him.
Marion: (distraught) Oh Joe, Joe.
Joe: I've been thinkin' alot and I know I'm kinda slow sometimes, Marion, but I see things. And I know that, if, if anything happened to me that you'd be took care of, took care of better than I could do it myself. I never thought I'd live to hear myself say that but I guess now's a pretty good time to lay things bare.
Marion: (hiding her face behind her fists in shame) It's as though I'd be glad for you to go.
Joe: Honey, you're the most honest and the finest girl that ever lived and I couldn't do what I gotta do if I hadn't always knowed that I could trust ya. (He rises) Now don't you go countin' me out. (He straps on his holster) I wouldn't have lived as long as I have already if I wasn't pretty tough.

Knowing that Starrett doesn't stand a chance against the seasoned killer Wilson, Shane has changed back into his buck-skinned clothing - with his gun strapped on his waist. Entering the house, Marion cries to him: "Don't let him go, Shane! Don't anybody go." Shane proposes to go in Joe's place, knowing that he is the obvious match for the final shootout: "This is my kind of game, Joe...Maybe you're a match for Ryker, maybe not, but you're no match for Wilson." Marion pleads with her husband to give up his fight and move on from their married life's dream-home. [The external Ryker threat has divided their marriage and placed them at odds with each other, and Marion is caught between the two struggling men who represent the dual forces of pacifism and war, or domesticity and unsettled wandering.]

Marion: You're both out of your senses. This isn't worth a life, anybody's life. What are you fighting for? This shack, this little piece of ground, and nothing but work, work, work? I'm sick of it. I'm sick of trouble. Joe, let's move. Let's go on. Please!
Joe: Marion, don't say that. That ain't the truth. You love this place more than me.
Marion: Not anymore.
Joe: Even if that was the truth, it wouldn't change things.

When Joe co-opts Shane's rightful place as a gunfighter, they come into conflict with each other and become foes rather than allies. Shane must battle Starrett in a memorable, violent fist fight to prevent him from going to a sure death, and to determine who will go to town to face Ryker's hired gun and defend the rights of the homesteaders.

Shane: It's no use, Joe.
Joe: No use? Well, what's stoppin' me?
Shane: I am.
Joe: Now you get out of my way. Am I gonna have to fight you too?
Shane: That depends on you. (Joe lunges at Shane in the doorway)

Their expected, climactic, no-holds-barred slug-fest, a two minute sequence, is filmed through the windows of the cabin and through the frantic, kicking hooves of horses frightened by their vicious struggle - fought in part by the tree stump that they had earlier pulled out of the earth together. The battle amidst barking dogs and stampeding cattle ends when Starrett is knocked unconscious by Shane's gun-butt. Shocked by Shane's treachery, a disdainful Joey doesn't understand why he unfairly used his gun to hurt his father and win - although the confrontation saved his father's life: "Shane. You hit him with your gun. I hate you." Shane dismisses Joe's horse, asks Marion to hide Joe's gun, and then praises Joe's fighting prowess: "No one can blame him for not keeping that date."

Thinking Shane has given up gunfighting for good, Marion reveals their unspoken love and knowingly asks:

Marion: You were through with gun-fighting?
Shane: I changed my mind.
Marion (softly): Are you doing this just for me?
Shane (respectfully): For you, Marion - for Joe - and little Joe.
Marion: Then we'll never see you again?
Shane: Never's a long time, ma'am. Tell him, tell him I was sorry.
Marion: No need to tell him that.

Shane realizes that he must leave the homesteaders for good after his heroic deed for them. Marion approaches Shane as if to kiss the man who will save her family, but Joey's request of "Mother" interrupts her desire. The gunfighter parts with a simple, but long handshake - and look from Marion as she bids him well: "Please, Shane. Please, take care of yourself." As Shane rides away alone into the distance, clad in his buckskins with his gunbelt, Marion helps her son to understand Shane's behavior: "Shane did what he had to do, Joey." Joey admits that he doesn't really hate Shane and forgives him as he rides away:

Shane, I'm sorry...Shane! Shane. I'm sorry.

At his mother's urging ("He didn't hear you"), Joey runs after Shane to apologize. (Shane is unaware that Joey and Torrey's dog follow after him and trail him all the way into town.)

On his heroic, slow ride into town, the low tracking camera angle, the darkness, and the musical soundtrack accentuate Shane's heroic yet lonely position on the horizon, set amidst the vast panorama of the mountains. Shane's ride takes the route earlier followed by Torrey and Shipstead. Joey takes a short-cut through Cemetery Hill behind him.

Shane must face Ryker, Morgan and Wilson in the tense, final shootout scene in Grafton's saloon. It is almost dark as Shane slowly enters the saloon, looks around, scares off one card player, and leans leisurely against the saloon's bar. He meets and challenges Ryker in the back of the room. Sitting with his back against one wall, Wilson moves his black coffee pot to the side to keep it out of his way. [Earlier, Morgan had climbed the stairs to the upper balcony with a rifle.] As in the earlier fist fight scene, Joey (and the dog) watches from under the saloon doors:

Shane: I came to get your offer, Ryker.
Ryker: I'm not dealing with you. Where's Starrett?
Shane: You're dealing with me, Ryker.
Ryker: I got no quarrel with you, Shane. You walk out now and no hard feelings.
Shane: What's your offer, Ryker?
Ryker: To you, not a thing.
Shane: That's too bad.
Ryker: Too bad?
Shane: Yeah, you've lived too long. Your kind of days are over.
Ryker: My days? What about yours, gunfighter?
Shane (knowing his days are numbered): The difference is I know it.
Ryker: All right. So we'll all turn in our six-guns to the bartender. We'll all start hoeing spuds. Is that it?
Shane: Not quite yet.

Shane understands that his days as a rugged individualist - in this case, as a lone gunfighter, are tragically numbered ("days are over") with the advance of civilization, but that he can't be anything else. He knows he must take familiar action from his past to help restore order in a lawless town, defeat the pure evilness of Wilson, and protect those he loves. Shane is unable to back down from a confrontational fight when words have proved insufficient, but he also is aware that he doesn't really belong there in the settled valley (earlier he had told Joe of his destination: "One place or another. Some place I've never been"). Paradoxically, he must leave town as an outcast-outsider - sacrificially weakening himself after defending the weak with his guns and making the valley safe for further growth and prosperity.

He repeats lines of dialogue that Wilson and Torrey had spoken, topped by the same insult:

Shane (to Ryker): (referring to Wilson) We haven't heard from your friend here.
Wilson: I wouldn't push too far if I were you. (Wilson stands and approaches, while the saloon dog slinks out and another card player departs.) My fight ain't with you.
Shane: It ain't with me, Wilson?
Wilson: No it ain't, Shane.
Ryker: I wouldn't pull on Wilson, Shane. Will, you're a witness to this.
Shane: So you're Jack Wilson.
Wilson: What's that mean to you, Shane?
Shane: I've heard about you.
Wilson: What have you heard, Shane?
Shane (provokingly): I've heard that you're a low-down Yankee liar.

Wilson uses his familiar line as a comeback, accompanied by an icy, evil smile:

Prove it.

Shane's lightning draw outdraws and kills Wilson swiftly with two shots, sending him collapsing into a table. Ryker also attempts to fire on him, but Shane whirls around and outdraws him with one shot. He twirls his single gun back into his holster and begins to walk out. Young Joey (alertly watching the conflict from beneath the swinging doors of the saloon) warns Shane of a second-floor ambush from behind by Ryker's brother Morgan, accomplishing his wish of participating in Shane's heroic action. Joey yells: "Shane, look out." Shane's last opponent is shot dead as well, but Shane is imperceptibly wounded. He looks back at the bodies as he leaves the saloon.

At the conclusion of the film, Joey apologizes for expressing his hate when Shane knocked out his father. The young boy admires his hero, but Shane knows that Joey is admiring him for the wrong reasons. He is certain that he must move on (without Joey) and not provide Joey with an inappropriate role model for his life. Shane simply states: "A man has to be what he is." [Note: this line is a variation on the cliched western genre phrase: "A man's gotta be what a man's gotta be."] As Shane starts to leave, he indicates to Joey that he will never return ("there's no living with a killing" - or a killer), and that his out-of-place way of life is a 'dying breed':

Joey: Shane! I knew you could, Shane. I knew it. I knew it just as well as anything. Was that him? Was that Wilson?
Shane: That was him. That was Wilson alright. He was fast - fast on the draw. Joey, what are you doing here?
Joey: I'm sorry, Shane.
Shane: You don't have to be. You'd better run back.
Joey: Can I ride home behind you?
Shane: Afraid not, Joey.
Joey: Please, why not?
Shane: I gotta be goin' on.
Joey: Why, Shane?
Shane: A man has to be what he is, Joey. You can't break the mold. I tried it and it didn't work for me.
Joey (pleading, unwilling to give Shane up so easily): We want you, Shane.
Shane: Joey, there's no living with, with a killing. There's no going back from it. Right or wrong, it's a brand, a brand sticks. (Shane shows sad affection in his eyes for the boy.) There's no going back. Now you run on home to your mother and tell her, tell her everything's alright, and there aren't any more guns in the valley.
Joey (noticing that Shane has been wounded): Shane, it's bloody. You're hurt.
Shane (overlooking his wound): I'm alright, Joey. You go home to your mother and your father and grow up to be strong and straight. And Joey, take care of them, both of them.
Joey: Yes, Shane. (Tears well up in Joey's eyes)

The film ends with the classic, poignant goodbye and farewell. [Joey is the first to see Shane ride into their community, and he is the only one to bid Shane, his mythical idolized hero, farewell.] Joey runs down the boardwalk as Shane begins riding away to leave the valley.

Joey: He'd never have been able to shoot you - if you'd have seen him.
Shane (quietly): Bye, little Joe.
Joey: He never even would have cleared the holster, would he, Shane?

Badly (and possibly lethally) injured in the gun battle, Shane disappears into the twilight meadow toward the distant hills framed against the sky and mountains, growing smaller and smaller in the distance. Young, anguished, and heartbroken Joey sadly calls out to his hero/idol in one of filmdom's most famous, melancholic and haunting endings, as tears streak down his face. [He is left abandoned and stranded there, summarizing the needs that the members of his family - including himself - have had for Shane.]

Pa's got things for you to do, and Mother wants you. (the words "wants you" echoes twice) I know she does. Shane. Shane! (echoes) Come back! (echoes)

The mountains echo Joey's plaintive call as Shane (slightly slumped over in his saddle, wounded and dying - and almost dead?) rides up the crest to a second small town cemetery (not Cemetery Hill). He rides through the tombstones as he ascends toward the snow-capped Tetons (metaphorically ascending into heaven?). In a mirror image of the film's opening, he follows the same path that he had taken in his descent into the valley.

Joey's final call, mostly spoken as a thought to himself, is softly heard (so faint that Shane doesn't even hear it) - implying that symbolically, Shane's life (or way of life) is over:

'Bye, Shane.

In the film's final few seconds, however, Shane and his horse mythically descend until both move completely out of camera range, possibly implying that Shane’s mortal body returns to the earth.