Morgan decided that it would be necessary to re-capture the island of Catalina, to serve as a base of operations for the venture. Although he had been advised by some Spanish prisoners, that the Camino Real, would be the best way to go, believing that they were directing him wrongly, decided to go via the Chagres River and Las Cruces Trail. 

Before they could cross the isthmus of Panama they would have to capture the Spanish Castillo de Santo Lorenzo which had been built at the mouth of the Chagres River, in 1595. It was situated on a high, steep rocky cliff, protecting it from the south. The north side of the fort was protected by the river. The landward approach was protected by four bastions with large cannons that covered the entrance. Two additional bastions, with cannons, guarded the outlet of the river. There were reefs and sand bars that offered additional protection from the sea. The whole fort was surrounded by a palisade filled with dirt. The only entrance to the fort was by a draw bridge that spanned a large gorge. Morgan sent one of his Captains, Joseph Brodely, to do the job. He remained in Santa Catarina, making preparations, for adventure.

Soon after San Lorenzo was taken by Brodely, Morgan and his force arrived at the mouth of the Chagres River, to began their march across the Isthmus to Panama. It was decided that 500 men would remain at the fort, rebuilding the fortifications, in case, re-enforcements arrived from Porto Bello or Cartagena. Another 150 men were left on the ships, to take care of them, and sail them away, if necessary. 1,200 of the men were given orders, to march on to Panamá. 

At the town of Chagres, they confiscated some 32 canoes and 5 flat bottom boats on which they mounted guns, to make the trip up river. On January 18, 1571, the left the town of Chagres, going up river. Since he had more men, that would fit in the boats, some had to walk along side of the river. On the first day, the traveled 6 leagues, and stopped at a place called Rio de Dos Brazos. There the men went looking for food, but found none. The Spaniards had stripped it clean, removing any thing that could feed the pirates. 

On the second day, they reached a place called La Cruz de San Juan Gallego. Here the flat bottom boats ran aground, and some of the cannons dropped into the river. The river was shallow, because it was dry season, and the larger, flat bottom boats, had reached the end of their line. The cannons were too heavy to load on the canoes, so they were left on the boats, on the side of the river, and they continued without them. The loss of these boats, required that more men would have to walk along the banks of the river. But, they decided to leave 160 men with the boats, to serve the purpose of protecting the boats with cannons, and as a reserve, incase the Spanish attacked.

On the fourth day, a large group of men went with a guide, and started marching overland. The rest continued up river, sending two canoes about 100 yards in front, in case there was a Spanish ambush. The rest of the canoes followed the two lead canoes. At noon, they reached a place called Torno Caballos, where the point canoes, indicated that there would be a Spanish ambush. When they rushed on shore, ready to fight the Spaniards, they had taken flight, and there was nobody there. At the huts there, they found some leather bags, that had been used to carry meat, but no food anywhere. The little they found, was not enough for the large number of buccaneers. They found the remains of a camp of Spanish solders, where about 500 men had been waiting to ambush them, but retired. 

Morgan ordered 200 Frenchmen armed with the best muskets to the front of the line to protect the main force. Since the Buccaneers lived by the way of the gun, and were expert hunters, they were all, excellent shots. The rest of the buccaneers, formed into 3 battalions, and marched down the hill, into the plain in front of the city, towards the Spanish troops. The governor started his engagement by ordering a cavalry charge, but they had a tough time, since the ground was wet and muddy. The horses could not run, at full speed, since they were slipping in the mud. Meanwhile, the French musketeers, were prepared and laid down a very accurate volley of fire. They were kneeling to improve their aim, and fired in volleys. When one fired, the other was loading his musket and they continued this deadly fire. The cavalry was quickly decimated by the accurate shooting of the buccaneers and  the charge disintegrated. 

The Spanish infantry was marching up, behind the cavalry, was startled as they saw their cavalry go down, under the deadly fire. Shortly they were engaged with two battalions of buccaneers that struck them from the front and flanks. When they tried to stamped the wild bulls into the buccaneers ranks, they started waving flags, and shooting at the cattle. They were spooked with all the noise and smoke, ant scattered in all directions. Some even ran into the ranks of the Spanish infantry and others into town, where they created havoc.

The cavalry that escaped the slaughter, made a disorganized retreat to the rear, running through the ranks of the infantry, that was aligned to finish off, what survived the cavalry charge. The infantry, already in disarray, put up half-hearted resistance until Morgan's men flanked them. When they saw that the pirates were now coming at them, from three sides, some of them broke ranks, throwing their weapons on the ground and ran to the city for protection.  When the infantry saw that all was lost, those that had held their lines, scattered, abandoning their positions and leaving the city to the buccaneers.

The fighting lasted for two hours, and when it was over, the pirates sat down to rest. The friars from the hospital, moved into the field, to care for the wounded Spaniards, and Morgan ordered his men to shoot them all. They were able to capture a wounded cavalry officer, that informed Morgan of the exact defenses of the city. He told him, that there were 8 brass cannons mounted on  the high building, along the main road and about 50 soldiers, manning the guns. 

The pirates were surprised a the few casualties the suffered and counted 600 dead Spaniards and more wounded on the battle field. Morgan called his men to order, and they proceeded to march into town, avoiding the main road. The cannons were loaded with grapeshot, caused more casualties, then the fighting on the field. In the charge into town, the Morgan ordered them to kill anybody that offered any resistance, which they did. After two hours of fierce fighting, the town was theirs. The advance on the city, caused the buccaneers to lose 20 men, and the same number were wounded. This was more than they lost outside the city.

Morgan entered Panama and was unable to find the bulk of the treasures and gold, the city was reported to contain. The Spanish, warned in advance of Morgan's pending attack, hide most of the treasures they could. Most of the wealthier citizens had long since collected their valuables and disappeared before the buccaneers arrived at the city gates. The city was set ablaze by the Spanish Governor (some say, Exquemilin, who was on this expedition, wrote that Morgan ordered the burning of the town, and then, when the fire got out of hand, blamed it on the governor.), to deny the English the pleasure of destroying the city themselves. This destroyed all of the rich warehouses, full of silk, spices and other commodities, brought from Spain's colonies in the Pacific. Panamá was reported to be the wealthiest city in the world, at the time. Most of the houses were made of wood, and had a large collection of art, and expensive furnishing, that burned in the fire. In the city there were about 2,000 homes belonging to wealthy merchants, about 3,000 homes of the not wealthy, 7 monasteries and convent, a hospital, cathedral and assorted smaller churches. One of these churches was adorned with a golden alter, that the monks, in preparation of the attack, painted it white, to cover it up and disguise it. When the buccaneers entered the church, all they saw was a regular alter, and left, looking for loot elsewhere. Many people were burned when they sought refuge from the advancing pirates, by hiding in the homes that were set on fire. By the next day, the whole city had been reduced to ashes.  

The Spanish had also removed most of the food stores, or burned it, denying the buccaneers of food. Morgan's force remained in the smoldering city for a month.  Having a great hatred for the Catholic clergy, he ordered that all clergy that could be found, was to be tortured, until they revealed where the treasures of the church were hidden. If they refused to talk, then they were killed. They torturing the inhabitants that had not already evacuated the city, trying to find the treasures they may have hidden away.  and sending expeditions into the surrounding countryside in search of fleeing citizens and their treasures. 

In the bay, there was a barque, that had been stranded in low tide. Morgan sent 25 men on this barque at high tide, to search for Spanish ships that they could capture. They were also to go to the island of Taboga, where they observed ships headed, before they captured the city.

Fearful of a counter attack by the Spaniards, Morgan ordered his men to sleep out side the city. He was astonished with the size of the city, and the number of inhabitants that it contained. He had a hard time believing that his small group of men had captured so many. The next morning, they again moved into the city, and carried all of their wounded to the monastery church that was still standing. He ordered that all of the cannons, be mounted around the church, just incase, they were attacked. 

The next day, Morgan sent a detachment of 150 men, to advise the men stationed at Cruces and San Lorenzo, of their success. For the next couple of days, the buccaneers search through the ashes of all of the homes, finding some melted gold and silver. In the cisterns, they found some of the treasure that was tossed there, in desperation, to keep it from the pirates.

On the third day, after Panamá fell, two parties of 150 men each, were sent into the country side, to search for hidden Spaniards and treasures. They returned two days later, with 200 prisoners, including men and women and slaves. That same day, the barque that Morgan sent out, returned with three more ships it had captured. The galleon, loaded with silver and jewels, managed to escape. Morgan had the other three ships outfitted, and all four, with 120 men on them set off in pursuit of the Galleon. They were not able to catch it, but did return with food, and over 20,000 pieces of eight, and other valuables. Morgan also got word, that the men stationed at San Lorenzo, had captured a couple of Spanish ships, loaded with treasure and food stores. These events, encouraged Morgan to remain longer in Panamá. Soon he was sending out two groups of men, to search for prisoners and treasures. As one left, another returned, and they scoured the country side, going to all of the towns in the country side, bringing back prisoners, treasure and food.

One time, the buccaneers captured a poor cripple they found in a deserted home outside the city. The man was dressed in fancy clothes, and was brought in to be tortured to find out where he had hidden his money. They found a small gold key, at they believed to be to a treasure chest. Obviously, the man had found the clothes in the house he was hiding in, and knew nothing about where the gold key went. He was tortured on the rack, until his arms were pulled out of their socket. The man kept insisting that he knew nothing, but the pirates would not believe him. They put a band around his head, and tighten it until his eyes popped out of their sockets. Since he still would not tell them where the chest was at, they hung him by his genitals, and set fires under him, burning him alive. When they became convinced that he would not give them any information, they had a Negro stab him to death with a spear. Such were the atrocities committed by the pirates on the citizens of Panamá.

Nobody in town was safe from the buccaneers. Even the women were treated severely. If a woman resisted the advances of a buccaneer, they were starved, tortured and beaten, until the accepted the buccaneer. The only women that were spared the humiliation, were those that submitted freely. Morgan, as their General, who should have set an example, for their behavior, was just as bad as them. He always insisted on having all of the pretty female prisoners brought to him first. After he was through with them, he gave her to his men.

There was one very attractive woman, who's husband was a merchant, and had sailed for Peru on business, before the pirates arrived. She had escaped with some of her friends to Taboga, but were captured, and returned to Panamá. Morgan was impressed with her beauty, and ordered that she be put in a room, separate from all of the other prisoners. Morgan assigned a slave girl, to look after every need, and he courted her, behaving as a perfect gentleman. The lady was impressed with Morgan's manor and demeanor. He was always on his best behavior, when he courted her. At one point he suggested to her, that they have a sexual encounter, which she turned down. Later, he ordered her to submit to him, and she responded that since she was his prisoner, he could do anything he wanted to her dead body, but as long as she was alive, she would resist him, or any other man, with all her strength. This enraged Morgan, who locked her in her room, and would not allow food to be brought to her. He only allowed enough food to be given to her, too keep her alive. 

She tried to buy her freedom, by telling some friars the whereabouts of some of her jewels, so that they could retrieve it for ransom. The friars, collected the jewels, but used it to ransom some of their friends, instead of the lady. Leaving the lady a prisoner of Morgan, and praying every day, so that God would give her strength to resist this advances.

On February 24, 1671, Morgan left Panamá with all of his men and 175 mules loaded with treasure as well as 500 to 600 prisoners, men, women, children and slaves, everybody who could not produce a random, including the beautiful lady. That night, they camped in an open field, with the prisoners in the center, and the pirates, surrounding them. The prisoners suffered terribly on the march, especially the women and children. Morgan would not feed them, and they had to scavenge around for food to eat. When the prisoners asked for mercy, Morgan responded that he had come for gold, and if they could not pay a ransom, he would take them with him to Jamaica, and sell them as slaves. 

By the time they reached Cruces, he informed the prisoners that they had three days, to produce a ransom, or else, they were off to Jamaica. There he sent some of his men, to secure food, to help stock his ships for the return voyage. Here, they also went through the customary process of searching each other, for any hidden treasure. The French buccaneers objected to the searches, but were in the minority, and had to submit. They were able to collect all of the rice and maize in the area, and on the 15th of March, they set off, down the river. Some of the prisoners were able to produce a ransom, and they were set free; but, this was a small number, only. A slave, who had overheard the friars, that failed to beautiful lady, talking about it, informed Morgan. He ordered that the friars be arrested, and released the lady. Once all the formalities were completed, the set off in the canoes to San Lorenzo.

They arrived at the mouth of the Chagres River, on March 19th. Here they found that most of the men wounded during the attack on the fortress, had died from hunger, and the survivors, were not much better off. They had been forced to kill and eat the buzzards, what were feasting on the dead Spaniards, since meat was scarce. Morgan sent a vessel to Porto Bello, requesting the ransom of San Lorenzo, and the prisoners. In a couple of days, the boat returned, with the news, that the governor of Porto Bello, would not pay anything. 

When the booty was divided, the men grew mutinous as realized that each mans share would amount to less than 200 pieces of eight. The jewelry that was captured, Morgan valued at almost nothing, and kept it for himself. A lot of the treasures, were missing, and the crew blamed Morgan, for its loss. Morgan took his cut of the loot aboard his ship and when nobody was watching, sailed for Port Royal, leaving the furious, bloodthirsty mob of buccaneers behind. His cronies, took off at the same time in their ships and followed him to Jamaica. Some of the French buccaneers took chase, but Morgan had taken the fastest ships, that had been loaded with provisions. They could not catch up with him, and soon ran out of food, and had to turn around to find supplies. Most of the English buccaneers, continued sailing the coast of Panama, hoping to catch a Spanish trader or Galleon.