<PAGE>

               SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C.  20549
                                
                            FORM 10-Q
                                

(Mark One)
(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
     
     For the quarterly period ended:      September 30, 1998
                                    -----------------------------

                               OR

( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
     
     For the transition period from:              to
                                    --------------  -------------

Commission file number                 1-11569
                      -------------------------------------------

                    RIO HOTEL & CASINO, INC.
-----------------------------------------------------------------
     (Exact name of registrant as specified in its charter)
                                
           Nevada                                 95-3671082
-------------------------------              --------------------
(State or other jurisdiction of                (I.R.S. Employer
incorporation or organization)                Identification No.)
                                
3700 West Flamingo Road, Las Vegas, Nevada             89103
-----------------------------------------------------------------
(Address of principal executive offices)               (Zip Code)

                         (702) 252-7733
-----------------------------------------------------------------
      (Registrant's telephone number, including area code)

                         Not Applicable
-----------------------------------------------------------------
 (Former name, former address and former fiscal year, if changed
                       since last report)

      Indicate by check mark whether the registrant (1) has filed
all  reports required to be filed by Section 13 or 15(d)  of  the
Securities  Exchange Act of 1934 during the preceding  12  months
(or  for such shorter period that the registrant was required  to
file  such  reports),  and (2) has been subject  to  such  filing
requirements for the past 90 days.    Yes   X    No
                                         -------   -------

     Indicate  the  number  of  shares outstanding of each of the
issuer's  classes  of  common stock, as of the latest practicable
date.
                                
    24,801,837 shares of Common Stock, $0.01 par value as of
                        November 9, 1998
-----------------------------------------------------------------

                                1
                                
<PAGE>
                                
                            FORM 10-Q
                                
                        TABLE OF CONTENTS

                                                               PAGE
                                                              NUMBER

PART I.  FINANCIAL INFORMATION                                   3

 Item 1.  Financial Statements                                   3
          
  CONSOLIDATED BALANCE SHEETS                                    3
  
  CONSOLIDATED STATEMENTS OF INCOME                              4
  
  CONSOLIDATED STATEMENTS OF CASH FLOWS                          5
  
  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION               6
  
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                     7
  
 Item 2.  Management's Discussion and Analysis of Financial
          Condition and Results of Operations                    9
          
 Item 3.  Quantitative and Qualitative Disclosures about Market
          Risk                                                  15
          
PART II.  OTHER INFORMATION                                     16

SIGNATURE                                                       18

EXHIBIT INDEX                                                   19


                                2
                                
<PAGE>

                 PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
            RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
                   CONSOLIDATED BALANCE SHEETS

                                                          September 30,              December 31,
                                                              1998                       1997
                                                          -------------             --------------
                                                           (Unaudited)
                             ASSETS
<S>                                                       <C>                       <C>
Current assets:
  Cash and cash equivalents                               $  21,268,560             $  22,241,976
  Accounts receivable, net                                   37,748,346                28,177,480
  Inventories                                                13,751,877                 7,797,343
  Prepaid expenses and other current assets                   8,418,299                 8,277,440
                                                          --------------            --------------
    Total current assets                                     81,187,082                66,494,239
                                                          --------------            --------------  

Property and equipment:
  Land and improvements                                     101,428,219                85,713,088
  Building and improvements                                 436,802,701               418,618,050
  Equipment, furniture and improvements                      94,935,270                82,792,652
  Less: accumulated depreciation                           (101,171,701)              (82,162,055)
                                                          --------------            --------------
                                                            531,994,489               504,961,735
  Construction in progress                                  105,342,242                 5,354,757
                                                          --------------            --------------
    Net property and equipment                              637,336,731               510,316,492
                                                          --------------            --------------

Other assets, net                                            24,649,363                11,344,116
                                                          --------------            --------------

                                                          $ 743,173,176             $ 588,154,847
                                                          ==============            ==============


              LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current maturities of long-term debt                        2,621,350                 2,434,483
  Accounts payable                                           10,217,436                11,440,103
  Accrued expenses                                           26,973,012                23,554,336
  Accounts payable - related party                           17,362,984                 2,808,488
  Accrued interest                                            8,974,492                 7,412,999
                                                          --------------            --------------
    Total current liabilities                                66,149,274                47,650,409
                                                          --------------            --------------

Non-current liabilities:
  Long-term debt, less current maturities                   367,747,286               250,522,894
  Deferred income taxes                                      17,931,762                19,806,419
                                                          --------------            --------------
    Total non-current liabilities                           385,679,048               270,329,313
                                                          --------------            --------------

    Total liabilities                                       451,828,322               317,979,722
                                                          --------------            --------------

Stockholders' equity:
  Common stock, $0.01 par value;
   100,000,000 shares authorized;
   24,800,941 and 24,643,141 shares
   issued and outstanding                                       248,010                   246,432
  Additional paid-in capital                                182,588,542               179,912,196
  Retained earnings                                         108,508,302                90,016,497
                                                          --------------            --------------
    Total stockholders' equity                              291,344,854               270,175,125
                                                          --------------            --------------
                                                          $ 743,173,176             $ 588,154,847
                                                          ==============            ============== 
</TABLE>                                
                                
   See accompanying Notes to Consolidated Financial Statements

                                3
<PAGE>
                                
<TABLE>
<CAPTION>

            RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF INCOME
                           (UNAUDITED)


                                                         Three Months Ended                       Nine Months Ended
                                               ---------------------------------------   ---------------------------------------
                                               September 30, 1998   September 30, 1997   September 30, 1998   September 30, 1997
                                               ------------------   ------------------   ------------------   ------------------
<S>                                             <C>                  <C>                 <C>                    <C>
Revenues:
  Casino                                        $   54,902,000       $   57,155,106      $  148,986,698         $  141,215,071
  Room                                              19,829,676           17,667,809          59,936,411             50,398,228
  Food and beverage                                 33,432,655           30,888,182          99,587,841             83,048,512
  Other                                              8,314,524            7,006,583          21,825,801             18,694,761
  Casino promotional allowances                     (9,428,215)          (9,142,737)        (28,403,850)           (22,663,473)
                                                ---------------      ---------------     ---------------        ---------------
                                                   107,050,640          103,574,943         301,932,901            270,693,099
                                                ---------------      ---------------     ---------------        ---------------
Expenses:
  Casino                                            31,812,915           30,684,216          83,796,310             74,432,544
  Room                                               6,488,707            5,347,864          18,870,924             14,996,447
  Food and beverage                                 23,848,735           24,111,801          71,532,501             64,025,064
  Other                                              6,346,615            4,154,300          13,829,848             11,253,083
  Selling, general and administrative               12,692,845           13,529,920          42,653,806             38,062,029
  Depreciation and amortization                      7,083,123            6,440,433          20,655,024             18,677,833
  Preopening expense                                         -                    -                   -             11,200,000
                                                ---------------      ---------------     ---------------        ---------------
                                                    88,272,940           84,268,534         251,338,413            232,647,000
                                                ---------------      ---------------     ---------------        --------------- 
Operating profit                                    18,777,700           19,306,409          50,594,488             38,046,099

Interest expense                                     6,145,319            7,101,757          18,227,681             19,199,170
Merger costs                                         3,246,138                    -           3,246,138                      -
                                                ---------------      ---------------     ---------------        ---------------  

                                                     9,391,457            7,101,757          21,473,819             19,199,170
                                                ---------------      ---------------     ---------------        ---------------
Income before income tax                             9,386,243           12,204,652          29,120,669             18,846,929

Income tax provision                                (3,425,799)          (4,449,386)        (10,628,864)            (6,879,136)
                                                ---------------      ---------------     ---------------        ---------------
Net income                                      $    5,960,444       $    7,755,266      $   18,491,805         $   11,967,793
                                                ===============      ===============     ===============        =============== 
Earnings per common share:
  Basic                                         $         0.24       $         0.36      $         0.75         $         0.56
                                                ===============      ===============     ===============        ===============
  Diluted                                       $         0.24       $         0.35      $         0.73         $         0.55
                                                ===============      ===============     ===============        ===============
Weighted average number of common shares
outstanding:
  Basic                                             24,794,093           21,378,821          24,678,416             21,305,604
  Stock Options                                        292,154              606,103             752,086                408,521
                                                ---------------      ---------------     ---------------        ---------------   
  Diluted                                           25,086,247           21,984,924          25,430,502             21,714,125
                                                ===============      ===============     ===============        ===============
                                
                                
</TABLE>

   See accompanying Notes to Consolidated Financial Statements
                                
                                4
                                
<PAGE>

<TABLE>
<CAPTION>
            RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (UNAUDITED)
                                
                                                                                     Nine Months Ended
                                                                                       September 30,
                                                                           ---------------------------------------
                                                                                1998                    1997
                                                                           ----------------      -----------------
<S>                                                                        <C>                    <C>
Cash flows from operating activities:
  Net income                                                               $   18,491,805         $   11,967,793
  Adjustments to reconcile net income to net
   cash provided by operating activities:
     Compensation expense recognized from
       stock option grant                                                          86,160                 86,560
     Depreciation and amortization                                             20,655,024             18,677,833
     Provision for uncollectible accounts                                      (5,837,501)            11,603,861
     Deferred income taxes                                                      1,572,534              1,289,832
     (Increase) decrease in assets:
       Accounts receivable                                                     (3,733,365)           (25,466,219)
       Inventories                                                             (5,954,534)              (868,591)
       Prepaid expenses and other current assets                               (3,908,571)            (5,620,226)
       Other, net                                                               1,159,840              5,285,425
     Increase (decrease) in liabilities:
       Accounts payable                                                        (9,125,929)             1,453,236
       Accrued expenses                                                        12,100,552             12,803,614
       Accrued interest                                                         1,561,493              1,320,696
                                                                           ----------------       ----------------

Net cash provided by operating activities                                      27,067,508             32,533,814
                                                                           ----------------       ----------------

Cash flows from investing activities:
  Purchase of land and improvements                                           (15,642,631)            (6,062,970)
  Purchase of equipment, furniture and
    improvements                                                             (116,296,435)           (54,506,586)
  Funds used for investment in airline                                        (15,000,181)                     -
  Funds used for purchase of golf course                                                -            (16,386,159)
                                                                           ----------------       ----------------

Net cash used in investing activities                                        (146,939,247)           (76,955,715)
                                                                           ----------------       ----------------

Cash flows from financing activities:
  Proceeds from borrowings                                                    237,200,000             82,200,000
  Net proceeds from issuance of senior
    subordinated notes                                                                  -            121,562,500
  Net proceeds from common stock issuance                                       1,813,150              1,292,963
  Payments on notes and loans payable                                        (120,114,827)          (157,493,837)
                                                                           ----------------       ----------------

Net cash provided by financing activities                                     118,898,323             47,561,626
                                                                           ----------------       ----------------

Net increase (decrease) in cash and cash equivalents                             (973,416)             3,139,725
Cash and cash equivalents, beginning of period                                 22,241,976             10,623,094
                                                                           ----------------       ----------------

Cash and cash equivalents, end of period                                   $   21,268,560         $   13,762,819
                                                                            ===============        ===============
                                

</TABLE>

   See accompanying Notes to Consolidated Financial Statements
                                
                                5
                                
<PAGE>

<TABLE>
<CAPTION>
            RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                
        SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
                           (UNAUDITED)
                                
                                                                   Nine Months Ended
                                                                     September 30,
                                                          -------------------------------------
                                                                 1998                 1997
                                                          ----------------      ---------------
<S>                                                       <C>                   <C>
Cash payments made for interest, net of
  capitalized interest                                    $   13,537,653        $   17,596,459
                                                          ===============       ===============

Cash payments made for income taxes                       $    7,000,000        $    2,500,000
                                                          ===============       ===============

Non-cash financing and investing activities:
  Purchase of property and equipment financed
    through payables                                      $   17,435,484        $    2,121,363
                                                          ===============       ===============
Debt assumed in the purchase of land and golf course      $            -        $    4,483,448
                                                          ===============       ===============


Tax benefit arising from exercise of stock
  options under the Company's Non-Statutory
  and Long Term Incentive Stock Option Plans              $      778,614        $      921,399
                                                          ===============       ===============

</TABLE>

   See accompanying Notes to Consolidated Financial Statements
                                
                                6
                                
<PAGE>

            RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           (UNAUDITED)
                                
NOTE 1 - BASIS OF PRESENTATION

     The  consolidated financial statements include the  accounts
     of   Rio   Hotel  &  Casino,  Inc.  and  its  wholly   owned
     subsidiaries  Rio  Properties, Inc. ("Rio Properties"  which
     owns  and operates the Rio Suite Hotel & Casino [the  "Rio"]
     in  Las  Vegas, Nevada), Rio Development Company, Inc.,  Rio
     Resort  Properties, Inc., Rio Leasing, Inc., Rio Properties'
     wholly  owned subsidiaries, HLG, Inc. and Cinderlane,  Inc.,
     and Cinderlane Inc.'s wholly owned subsidiary, Twain Avenue,
     Inc. (collectively the "Company").

     All  significant intercompany balances and transactions have
     been eliminated in consolidation.

     The  consolidated balance sheet as of September 30, 1998 and
     the  related consolidated statements of income for the three
     and nine month periods ended September 30, 1998 and 1997 and
     consolidated  statements of cash flows for  the  nine  month
     periods ended September 30, 1998 and 1997 are unaudited but,
     in  the  opinion  of  management,  reflect  all  adjustments
     necessary  for  a  fair presentation  of  results  for  such
     periods.   The  results of operations for an interim  period
     are  not necessarily indicative of the results for the  full
     year.  The consolidated financial statements should be  read
     in  conjunction  with the consolidated financial  statements
     and  notes thereto contained in the Company's annual  report
     on Form 10-K for the year ended December 31, 1997.

NOTE 2 - INVESTMENT

     On  February  24,  1998, the Company's credit  line  with  a
     consortium of banks was amended and restated, increasing the
     amount  available  from $190.0 million  to  $275.0  million.
     Loan  costs  will  be reduced pursuant to  the  amended  and
     restated  terms  of the new agreement, and a  mechanism  has
     been  provided whereby the amount available under the credit
     line may be increased by an additional $25.0 million.
     
     In July 1998, the Company made a $15.0 million investment in
     New Airline, Inc. ("NAI"), a development stage airline to be
     based  in  Las  Vegas,  Nevada.   The  Company's  investment
     represents  approximately 19% of NAI's voting common  stock.
     In  addition,  the  Company will have a strategic  marketing
     agreement  with  NAI.  The Company has been advised  by  NAI
     that NAI will commence operations in early 1999, that it has
     secured  up to five gate locations at McCarran International
     Airport in Las Vegas, and that the Las Vegas Convention  and
     Visitors  Authority will provide advertising  and  marketing
     support for NAI.

NOTE 3 - EARNINGS PER COMMON SHARE

     The Financial Accounting Standards Board issued Statement of
     Financial  Accounting  Standards No.  128  -  "Earnings  Per
     Share"  ("SFAS  128")  which became  effective  for  periods
     ending  after  December  15, 1997 and replaces  historically
     reported  earnings  per  share with "basic,"  or  undiluted,
     earnings per share and "diluted" earnings per share.   Basic
     earnings  per share are computed by dividing net  income  by
     the weighted average number of shares outstanding during the
     period,  while  diluted  earnings  per  share  reflect   the
     additional dilution for all potentially dilutive securities,
     such as stock options.  Earlier application of SFAS 128  was
     not permitted.  Earnings
     
                                7
                                
<PAGE>

     per  share  for  the  three  and nine  month  periods  ended
     September 30, 1998 and 1997 in the accompanying Consolidated
     Statements  of Income have been computed in accordance  with
     SFAS 128.

NOTE 4 - PURCHASE COMMITMENT

     On  June  1,  1998,  the Company entered  into  an  Aircraft
     Purchase Agreement (the "Agreement") to purchase an aircraft
     for  $27.0 million, with $1.0 million to be deposited within
     90  days  of  the date of the Agreement and the balance  due
     upon  delivery  of the aircraft to the Company  which  shall
     occur within 60 days of January 31, 2000.  The aircraft will
     be   used   for   general   corporate  purposes,   including
     transportation   of  certain  international   and   domestic
     customers  of  the  Rio.   The  Company  is  purchasing  the
     aircraft from a company controlled by the Company's Chairman
     of the Board and Chief Executive Officer.

NOTE 5 - PROPOSED MERGER

     On August 9, 1998, the Company entered into an Agreement and
     Plan  of  Merger  (the  "Merger  Agreement")  with  Harrah's
     Entertainment,  Inc.,  a Delaware corporation  ("Harrah's"),
     and   HEI   Acquisition  Corp.  III,  a  Nevada  corporation
     ("MergerSub"),  providing for the merger of  MergerSub  with
     and into the Company (the "Merger"), with the Company to  be
     the  surviving  corporation.  If the Merger is  consummated,
     each  share of common stock, par value $0.01 per  share,  of
     the  Company issued and outstanding immediately prior to the
     Merger  would  be converted into the right  to  receive  one
     share  of  the common stock, par value $0.10 per  share,  of
     Harrah's.   The  Merger is subject to the  approval  of  the
     stockholders of the Company and Harrah's, the receipt of all
     necessary  gaming, regulatory and other approvals,  and  the
     satisfaction   or   waiver  of  certain   other   conditions
     precedent.

     A  special  meeting of stockholders has been  scheduled  for
     November 18, 1998 to vote upon the Merger Agreement.  Copies
     of  the  Joint Proxy Statement were mailed to the  Company's
     stockholders  of record as of October 5, 1998.   Subject  to
     stockholder,  regulatory  and other  approvals,  the  Merger
     could  be  completed  by  the  end  of  November  1998.   No
     assurance  can be given that the Merger will be approved  by
     the  stockholders of the Company and Harrah's, or  that  all
     conditions  precedent necessary to complete the Merger  will
     be satisfied or waived.

                                8
                                
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

STATEMENT ON FORWARD-LOOKING INFORMATION

     Certain information included herein contains statements that
may  be  considered forward-looking statements within the meaning
of  the Section 21E of the Securities Exchange Act of 1934,  such
as  statements  relating to plans for future  expansion,  capital
spending and financing sources.  Such forward-looking information
involves   important   risks   and   uncertainties   that   could
significantly  affect  anticipated results  in  the  future  and,
accordingly, such results may differ from those expressed in  any
forward-looking   statements  made  herein.   These   risks   and
uncertainties include, but are not limited to, those relating  to
construction  activities,  increased  competition   in   existing
markets  or  the  opening of new gaming jurisdictions  (including
expanded  casino  gaming activities on Native American  lands  in
California as a result of Proposition 5), dependence on  existing
management,  gaming  regulations  (including  actions   affecting
licensing),  leverage and debt service (including sensitivity  to
fluctuations in interest rates), issues related to the Year 2000,
domestic or global economic conditions and changes in federal  or
state tax laws or the administration of such laws.

PROPOSED MERGER WITH HARRAH'S ENTERTAINMENT, INC.

     On  August  9,  1998, the Company entered  into  the  Merger
Agreement with Harrah's and MergerSub providing for the merger of
MergerSub with and into the Company, with the Company to  be  the
surviving corporation.  If the Merger is consummated, each  share
of common stock, par value $0.01 per share, of the Company issued
and  outstanding  immediately  prior  to  the  Merger  would   be
converted  into  the  right to receive one share  of  the  common
stock,  par  value $0.10 per share, of Harrah's.  The  Merger  is
subject  to  the approval of the stockholders of the Company  and
Harrah's,  the  receipt of all necessary gaming,  regulatory  and
other  approvals, and the satisfaction or waiver of certain other
conditions precedent.

     A  special  meeting of stockholders has been  scheduled  for
November  18, 1998 to vote upon the Merger Agreement.  Copies  of
the   Joint   Proxy  Statement  were  mailed  to  the   Company's
stockholders  of  record  as  of October  5,  1998.   Subject  to
stockholder, regulatory and other approvals, the Merger could  be
completed  by  the  end of November 1998.  No assurances  can  be
given that the Merger will be approved by the stockholders of the
Company  and Harrah's, or that all conditions precedent necessary
to complete the Merger will be satisfied or waived.

MATERIAL CHANGES IN RESULTS OF OPERATIONS

     OVERVIEW

      The  Company, through a wholly owned subsidiary,  owns  and
operates an all-suite hotel-casino, the Rio Suite Hotel &  Casino
(the  "Rio"), in Las Vegas, Nevada.  The Rio features over  2,500
suites,  including over 1,500 suites contained in three connected
21-story  hotel  towers  (the "Ipanema Towers")  and  over  1,000
suites  in a new 41-story curved tower (the "Masquerade  Tower").
On  February 7, 1997, the Rio celebrated the grand opening of the
public  areas  of its Phase V Expansion project,  the  Masquerade
Village.  With the Masquerade Village and Tower, the Rio features
120,000  square feet of gaming space; 15 restaurants, a  737-seat
entertainment complex; a 32,000 square foot retail  area;  and  a
108,000  square  foot  outdoor  entertainment  area  featuring  a
landscaped sand beach and three swimming pools.

                                9
                                
<PAGE>

      On  September 8, 1997, the Company acquired the  Rio  Secco
Golf  Club  in Henderson, Nevada, a suburb of Las Vegas,  Nevada.
The golf course, located in the master-planned community of Seven
Hills,  is  complete and opened for play in  October  1997.   The
clubhouse  was completed during the second quarter of  1998.   In
addition  to  marketing  play on the golf  course  to  local  and
tourist customers, the Company intends to use the Rio Secco  Golf
Club  as part of golf packages for its guests.  See Part II, Item
5,  "Legal  Proceedings" for a discussion of litigation involving
the use of the Rio Secco Golf Club.  The Rio Secco Golf Club also
features a golf school operated by Butch Harmon, the Butch Harmon
School of Golf.

     The Company has assembled approximately 44 acres immediately
adjacent to the Rio (approximately seven of which are subject  to
options  to purchase), bringing the total acreage at the  Rio  to
approximately 84 acres.  In October 1997, the Company announced a
new master plan (the "New Master Plan") for continued development
of  the existing Rio site and the adjacent 44 acre site.  The New
Master Plan is expected to be implemented in phases, the first of
which  has  commenced and includes a state-of-the-art  convention
and   entertainment  center  adaptable  to  meet  a  variety   of
entertainment,  meeting,  special  event  and  convention   needs
(scheduled  to  be completed by March 1999); a  complex  of  nine
"Palazzo" suites (scheduled to be completed by December 1998);  a
restaurant  serving  authentic Chinese food (which  opened  April
1998);  a  valet  parking structure (which opened  May  1998);  a
retail  shopping area (scheduled to be completed by March  1999);
an  expanded outdoor area with an additional swimming pool (which
opened  July 1998); additional exhibition space in the Masquerade
Village (which opened November 1998); the creation of a concierge
suite  level  in the Ipanema and Masquerade Towers (which  opened
September 1998); an expansion of the Rio's spa (scheduled  to  be
completed  by November 1998); a new road connecting the  Rio  and
the  Las  Vegas  Strip through an extension of  Twain  Avenue  to
Industrial Road (scheduled to be completed by February 1999); and
additional  customer  parking  (scheduled  to  be  completed   by
February 1999).

THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

     REVENUES

      The  Company's net revenues increased to $107.1 million  in
the  third quarter of 1998 from $103.6 million in the same period
in  the  prior year, an increase of $3.5 million or  3%.   Casino
revenues of $54.9 million in the three months ended September 30,
1998 decreased $2.3 million or 4% from the $57.2 million reported
for  the  same  period  in  the prior  year.   This  decrease  is
primarily  a  result of a lower hold percentage of 17%  in  table
games for the quarter ended September 30, 1998 as compared to 23%
for  the  same  quarter in the prior year.  Table games  revenues
were $29.7 million for the three months ended September 30, 1998,
a decrease of $3.9 million or 12% from the $33.6 million reported
for  the  same period in the prior year.  Table games handle  was
$170.0  million  for the third quarter of 1998,  an  increase  of
$25.0  million  or 17% over the $145.0 million reported  for  the
same  period  in  the  prior  year.   Management  attributes  the
increase  in  handle  primarily  to  increased  advertising   and
promotional  efforts, as well as increased emphasis on  marketing
to  table  game customers with higher credit limits  and  average
wagers.   Slot  machine revenues of $24.2 million  in  the  third
quarter  of 1998 increased $2.5 million or 12% from third quarter
1997 revenues of $21.7 million.  Other casino revenues, including
race  and  sports  books, keno and poker, of $1  million  in  the
quarter  ended September 30, 1998 decreased $0.8 million  or  45%
from the same quarter in the prior year revenues of $1.8 million.
This  decrease is due primarily to losses in the sports  book  of
$0.1  million in the current year as compared to revenue of  $0.4
million  in  the prior year and due to the closure of  the  poker
room in May 1998.

     Room revenues of $19.8 million increased in the three months
ended  September  30,  1998 by $2.1 million  or  12%  from  $17.7
million in the same period for the prior year.  This increase  is
due primarily to a

                               10
                                
<PAGE>

higher  occupancy percentage in the current quarter of  92.7%  as
compared to 89.0% in the prior year as well as an increase in the
average  suite rate of $94.84 in the current quarter as  compared
to $88.72 in the third quarter of 1997.

      Food and beverage revenues increased $2.5 million or 8%  to
$33.4  million in the three months ended September 30, 1998  from
$30.9  million in the same three month period in the prior  year.
Management  believes  that  this increase  is  due  primarily  to
increased  advertising and promotional programs as well  as  food
and  beverage  prices that were generally higher in  the  current
year's third quarter than in the prior year's third quarter.

     Other revenues increased $1.3 million or 19% to $8.3 million
in  the  current  year's third quarter from $7.0 million  in  the
prior  year's third quarter.  Retail sales decreased $1.4 million
due  to  leasing  the  gift  shop and most  other  retail  shops,
previously  operated  by the Company, to  a  third  party.   This
decrease  was offset by an increase in shop rent of $0.5 million,
showroom  admissions  increase  of  $0.7  million,  golf   course
revenues  of  $0.6  million and recognition of  outstanding  chip
income of $0.6 million.

     OPERATING MARGINS

      Operating  profit as a percentage of net  revenue  was  18%
before  executive severance for the quarter ended  September  30,
1998  and 19% for the same quarter in the prior year.  The casino
operating margin was $23.1 million or 42% for the current  year's
quarter as compared to $26.5 million or 46% for the prior  year's
third  quarter.  Casino expenses were $31.8 million for the three
months ended September 30, 1998 compared to $30.7 million for the
three  months  ended September 30, 1997.  Increased  payroll  and
other  volume  related expenses, including casino  marketing  and
promotional  costs, were the primary reasons for the increase  in
casino  expense when comparing the two periods.   For  the  three
months ended September 30, 1998 and 1997, hotel operating profits
were  67%  and  70%,  respectively; food and  beverage  operating
profits  were  29%  and 22%, respectively;  and  other  operating
department  profits  were 24% and 41%, respectively.   Management
believes  that  the  food  and  beverage  operating  margin   was
positively  impacted by an increase in food and beverage  prices,
volume  related  purchasing and administrative efficiencies,  and
the  profitability of the VooDoo Cafe and Lounge which opened  in
May 1997.  The decrease in other operating department profits  is
due  primarily to losses incurred in operating the  golf  course,
offset  somewhat by the elimination of costs associated with  the
operations  of most retail shops being leased to a  third  party.
Selling,  general  and administrative expenses,  expressed  as  a
percentage of gross revenues, were 11% and 12%, respectively,  in
the quarters ended September 30, 1998 and 1997.  This decrease is
due  primarily to reversal of 1998 bonus accruals  in  the  third
quarter  of  the current year as bonus payments are discretionary
and not expected in 1998.

     PROMOTIONAL ALLOWANCES

      Promotional allowances, which represent the retail value of
rooms,  food,  beverage and other services provided to  customers
without  charge, were 8% for each of the quarters ended September
30, 1998 and 1997.

     DEPRECIATION AND AMORTIZATION

      Depreciation and amortization expense increased by  10%  to
$7.1  million in the quarter ended September 30, 1998  from  $6.4
million in the same quarter of the prior year.

                               11

<PAGE>

      OTHER INCOME AND EXPENSE

      Interest expense decreased $1.0 million to $6.1 million  in
the  third quarter of 1998 from $7.1 million in the third quarter
of  1997.  Interest expense was reduced by $2.3 million  and  $.8
million  for the three months ended September 30, 1998 and  1997,
respectively,  due to capitalization of interest on  construction
costs  of the upper floors of the Masquerade Tower, which  opened
in May 1997 and on land purchases, and in 1998, on the New Master
Plan,  the initial phase of which is referred to as the Phase  VI
Expansion, that commenced in October 1997.

     NET INCOME

     Net income for the third quarter of 1998 was $6.0 million or
$0.24  per  common  share on a diluted basis,  compared  to  $7.8
million or $0.35 per common share on a diluted basis in the third
quarter  of  1997.  In  the current year's quarter,  the  Company
incurred  $2.2  million  executive  severance  expense  and  $1.1
million  in  merger costs (total of $2.1 million  net  of  income
tax).   Adjusted  on  a pro forma basis for these  expenses,  net
income  for the quarter ended September 30, 1998 would have  been
$8.0 million, or $0.32 per common share on a diluted basis.

NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

     REVENUES

     The Company's net revenues increased $31.2 million or 12% to
$301.9  million  in  the first nine months of  1998  from  $270.7
million  in  the  first  nine months of  1997.   Casino  revenues
increased $7.8 million or 6% to $149.0 million in the nine months
ended  September 30, 1998 compared to $141.2 million in the  nine
months  ended September 30, 1997.  Table games revenues of  $72.4
million  in  the current year decreased $1.8 million or  2%  from
$74.1  million  in the prior year period.  Although  the  Company
experienced  a  $124.0  million or 32% increase  in  table  games
handle  to  $505.9 million in the first nine months of 1998  from
$381.9 million in the first nine months of 1997, table games hold
percentages   were   14%   and  19%,   respectively.    Increased
advertising  and promotional efforts, increased customer  traffic
associated  with  the  Masquerade  Village  and  Tower,  and   an
increased  emphasis  by  management on marketing  to  table  game
customers  with  higher  credit limits  and  average  wagers  are
considered to be the primary contributors to the increased  table
game  volume.   Slot machine revenues were $71.6 million  in  the
nine months ended September 30, 1998 as compared to $62.2 million
in  the nine months ended September 30, 1997, an increase of $9.4
million or 15%.  Other casino revenues, including race and sports
books,  keno and poker increased $0.1 million or 3% to $5 million
in  the  first nine months of 1998 when compared to $4.9  million
for  the same period in the prior year.  The increase in customer
traffic   associated  with  the  Masquerade  Village  and   Tower
expansion,  together with increased advertising  and  promotional
efforts are considered to be the primary reasons for increases in
slot  machine  and  other  casino revenues,  offset  somewhat  by
closure of the poker room in May 1998.

      Room  revenues  of $59.9 million in the nine  months  ended
September  30,  1998 reflect an increase of $9.5 million  or  19%
over revenues of $50.4 million in the nine months ended September
30,  1997.   This  increase  is due  to  an  increase  of  40,920
available  suite nights in the nine month period ended  September
30, 1998 as compared to the same period in the prior year due  to
opening of the Masquerade Tower in February 1997, an increase  in
the  occupancy  percentage from 90% for  the  nine  months  ended
September 30, 1997 to 94% for the nine months ended September 30,
1998,  and  an increase in the average suite rate in the  current
year of $95 compared to $89 in the prior year.

                               12

<PAGE>

     Food and beverage revenues increased $16.5 million or 20% to
$99.6  million in the nine months ended September 30,  1998  from
$83.0  million  in  the  nine months ended  September  30,  1997.
Management believes that full nine months operations of the  five
restaurants  and bars in the Masquerade Village  in  the  current
year,   the   increase  of  64,757  suites  occupied,   increased
advertising  and promotional programs and a general  increase  in
food  and  beverage  prices  were the  primary  reasons  for  the
increase.

      Other revenues of $21.8 million in the first nine months of
1998  increased by $3.1 million or 17% over the first nine months
of 1997 revenues of $18.7 million.  A decrease of $4.2 million in
retail sales, which resulted from leasing the gift shop and  most
other  retail shops that were previously operated by the  Company
to  a third party, was offset by increases in showroom admissions
of  $2.6  million, shop rental revenue increase of $1.6  million,
telephone and salon revenue increases totaling $0.7 million,  and
golf  course revenues of $2.1 million which did not exist in  the
prior year.

      OPERATING MARGINS

      Operating  profit as a percentage of net  revenue  was  17%
before  executive severance for the nine months  ended  September
30,  1998  and 18% before preopening expense for the  first  nine
months of the prior year.  The casino operating margin was  $65.2
million  or  44%  for  the nine months ended September  30,  1998
compared to $66.8 million or 47% for the same period in the prior
year.   Casino  expenses were $83.8 million for  the  first  nine
months of 1998 after a $4.6 million decrease in the provision for
doubtful  accounts.  Casino expenses in the first nine months  of
the  prior year were $74.4 million.  Increased payroll and  other
volume  related expenses together with increased casino marketing
and  promotional costs were the primary reasons for the  increase
in  casino expense when comparing the two periods.  For the  nine
months ended September 30, 1998 and 1997, hotel operating profits
were  69%  and  70%,  respectively; food and  beverage  operating
profits  were  28%  and 23%, respectively;  and  other  operating
department  profits  were 37% and 40%, respectively.   Management
believes  that  the  food  and  beverage  operating  margin   was
positively  impacted by an increase in food and beverage  prices,
volume  related  purchasing and administrative efficiencies,  and
the  profitability of the VooDoo Cafe and Lounge which opened  in
May  1997  and  is  located on the 40th and 41st  floors  of  the
Masquerade  Tower.  The decrease in the operating  profit  margin
for  other  departments is primarily due to  losses  incurred  in
operating the golf course, offset somewhat by the elimination  of
costs  associated with the operations of most retail shops  being
leased  to  a  third party.  Selling, general and  administrative
expenses, expressed as a percentage of gross revenues,  were  13%
for  each of the nine month periods ended September 30, 1998  and
1997.    Increases   in  payroll,  advertising  and   promotional
expenses,   property  taxes,  casualty  insurance  and  utilities
significantly  contributed to the $4.6 million  increase,  offset
somewhat by reversal of 1998 bonus accruals in the third  quarter
of  the current year as bonus payments are discretionary and  not
expected in 1998.

      PROMOTIONAL ALLOWANCES

      Promotional allowances, which represent the retail value of
rooms,  food,  beverage and other services provided to  customers
without  charge, were 9% and 8% of total revenues  for  the  nine
months   ended   September  30,  1998  and  1997,   respectively.
Management  believes  that this increase  was  primarily  due  to
complimentary  rooms,  food, beverage and  other  services  being
extended in connection with the volume increase in table games.

      DEPRECIATION AND AMORTIZATION
     
      Depreciation and amortization increased by $2.0 million  or
11%  to  $20.7  million  in  the  nine months ended September 30,
1998   compared  to  $18.7  million  in  the  nine  months  ended
September  30,

                               13

<PAGE>

1997. This increase is primarily attributable to depreciation and
amortization  expense  associated with the Masquerade Village and
Tower.

      OTHER INCOME AND EXPENSE
     
      Interest expense was $18.2 million in the first nine months
of  1998,  a decrease of $1.0 million from $19.2 million  in  the
first nine months of 1997.  Interest expense was reduced by  $4.5
million  and  $3.8  million, respectively,  for  the  nine  month
periods  ended  September 30, 1998 and  1997,  due  primarily  to
capitalization  of  interest related to  the  Masquerade  Village
expansion in 1997 and the Phase VI Expansion in 1998.

      NET INCOME
     
      Net  income  for the first nine months of  1998  was  $18.5
million,  or $0.73 per common share on a diluted basis,  compared
to  net income of $12.0 million, or $0.55 per common share  on  a
diluted  basis for the first nine months of 1997.  In the current
year,  the  Company  incurred  $2.2 million  executive  severance
expense  and $1.1 million in merger costs (total of $2.1  million
net  of  income  tax).  Adjusted on a pro forma basis  for  these
expenses, net income for the nine months ended September 30, 1998
would  have  been $20.6 million, or $0.81 per common share  on  a
diluted  basis.   In the prior year, the Company  incurred  $11.2
million  ($7.1  million net of income tax)  associated  with  the
opening of the Masquerade Village and Tower.  Adjusted on  a  pro
forma  basis  for these preopening expenses, net income  for  the
first nine months of 1997 would have been $19.1 million, or $0.88
per common share on a diluted basis.

IMPACT OF INFLATION

      Absent changes in competitive and economic conditions or in
specific prices affecting the industry, the Company believes that
the  hotel-casino industry may be able to maintain its  operating
profit  margins  in  periods of general inflation  by  increasing
minimum  wagering limits for its games and increasing the  prices
of  its  hotel rooms, food and beverage and other items,  and  by
taking  action designed to increase the number of  patrons.   The
industry may be able to maintain growth in gaming revenues by the
tendency  of customer gaming budgets to increase with  inflation.
Changes  in  specific  prices (such as  fuel  and  transportation
prices)  relative  to the general rate of inflation  may  have  a
material effect on the hotel-casino industry.

LIQUIDITY AND CAPITAL RESOURCES

      On February 24, 1998, the Company's credit line was amended
and restated, increasing the amount available from $190.0 million
to  $275.0  million and reducing the interest rate.  The  amended
and  restated agreement provides a mechanism whereby  the  amount
available under the credit line may be increased by an additional
$25.0 million.

      During the first nine months of 1998, net cash provided  by
operating  activities  was  $27.1  million.   Net  cash  used  in
investing  activities was $146.9 million, including approximately
$98.6  million related to the Phase VI Expansion, $12.5  in  land
acquisitions adjacent to the Rio and $15.0 million to invest in a
new airline company.

      Based  upon cash on hand, cash available through borrowings
under  the $275.0 million line of credit, $138.6 million of which
was  available  as  of September 30, 1998, and cash  provided  by
operations,  the  Company  believes that  it  has  adequate  cash
available  to fund purchase commitments, the Phase VI  Expansion,
ongoing maintenance and upgrades and the Company's operations.

                               14
                                
<PAGE>

YEAR 2000 ISSUE

     BACKGROUND AND RISK FACTORS
     
     The approach of the year 2000 has become a potential problem
for businesses utilizing computers in their operations since many
computer programs are date sensitive and will only recognize  the
last two digits of the year, thereby recognizing the year 2000 as
the  year  1900 or not at all (the "Year 2000 Issue").   If  this
situation  occurs,  the  potential  exists  for  computer  system
failures by computer programs, which could disrupt operations.

      THE COMPANY'S STATE OF READINESS
     
      The Company has appointed a Year 2000 Project Director  who
is  currently  establishing a task force with  members  who  have
specific   expertise  in  critical  areas  including  Information
Technology,   Security,  Casino  Operations,  Hotel   Operations,
Facilities  Management, and Accounting.  The  Year  2000  Project
Director   will   implement  the  widely  accepted   five   phase
methodology in addressing the Year 2000 Issue as follows:

          1.   Awareness
          2.   Assessment
          3.   Renovation
          4.   Validation
          5.   Implementation

      In addition, the Year 2000 Project Director has completed a
preliminary  inventory of systems that may be  sensitive  to  the
Year  2000  Issue.   This  preliminary inventory  indicates  that
substantially   all  IT-based  systems/applications   have   been
certified  as  Year  2000  compliant by the  applicable  software
vendors.   All systems and applications are expected to  be  Year
2000 compliant by mid-1999.

     COSTS TO ADDRESS THE YEAR 2000 ISSUE
     
     The Company has not completed its assessment of all costs to
address  the  Year 2000 Issue; however, it is not  expected  that
costs  incurred  will  have  a  material  impact  on  operations.
Maintenance or modification costs associated with the  Year  2000
Issue  will be expensed as incurred, while the costs of  any  new
software  will  be capitalized and amortized over the  software's
useful life.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
         RISK

         Not applicable.
     
                               15
                                
<PAGE>

                   PART II.  OTHER INFORMATION
                                
ITEM 1. LEGAL PROCEEDINGS

        On December 27, 1996, a purported stockholder  derivative
action  (PARK EAST, INC. V. ANTHONY A. MARNELL II, ET  AL.,  Case
No.  CV-596-01196-HDM  (RLH)) was  filed  in  the  United  States
District Court for the District of Nevada, against the Company as
a  nominal  defendant, five of the Company's  directors,  Marnell
Corrao Associates, Inc. ("Marnell Corrao") and Anthony A. Marnell
II Chartered ("Marnell Chartered").  On July 1, 1998, the Company
executed a settlement agreement (the "Agreement") with Park East,
Inc.  The United States District Court for the District of Nevada
took  note  of  the  Agreement on July 6,  1998.   The  Agreement
provides for the settlement and dismissal with prejudice  of  all
claims   asserted   by  Park  East,  Inc.  in   connection   with
construction  and  architectural contracts for  Phase  V  of  the
Company's Master Plan expansion project ("Phase V").  The parties
agreed that the terms of the contracts are fair and reasonable to
the  Company  and  its stockholders, and that the  Company  would
continue  to  submit  construction  project  contracts   to   its
independent audit committee.  No monetary amounts are being  paid
to  the plaintiffs in the case; however, the Company will pay  up
to  $100,000  for  plaintiff's attorneys' fees.   Notice  of  the
Agreement  and of the Hearing was sent to all record stockholders
and  all beneficial owners of Company common stock as of July  6,
1998.   The hearing was held on September 15, 1998, and the Court
approved  the  settlement as fair, reasonable  and  in  the  best
interest  of the Company and its stockholders.  Pursuant  to  the
settlement, on September 21, 1998, the Court entered its  written
Order and Final Judgment, dismissing the action with prejudice.

      Several  lawsuits  were  filed on September  18,  1997  and
October  15,  1997  against a number of entities,  including  the
Company,  which  have  been consolidated  by  the  Clark  County,
Nevada,  District Court (the "Nevada District Court")  under  the
designation,  "Seven  Hills  Golf Course  Litigation"  (Case  No.
A377455).  These lawsuits arose out of the Company's purchase and
operation  of  golf course property currently known  as  the  Rio
Secco Golf Club, which the Company acquired as an amenity for the
customers  of  Rio  Suite Hotel & Casino (the  "Rio  Customers").
Plaintiffs allege, among other things, that the sale of the  golf
course  was  in  violation  of relevant  CC&R's  and  that  other
relevant CC&R's required the Company to open the course  to  non-
Rio  Customers.  Plaintiffs are claiming that their interest  run
with  the  land, which the Company denies.  On October 28,  1997,
the  Company issued a press release opening the golf  course  for
play  to  non-Rio Customers and, then, agreed to keep the  course
open  to  non-Rio  Customers pending final  adjudication  of  the
lawsuits  as  to  the  Company.  On March  9,  1998,  the  Nevada
District  Court certified a class consisting of all  present  and
future  record owners of residential lots within the Seven  Hills
Master-Planned Community with respect to the issue  of  right  of
access.   On  April  3,  1998, the Nevada District  Court  denied
motions for summary judgment filed by various plaintiffs  in  the
consolidated action on the issue of access to the golf course and
denied  a motion for mandatory injunctive relief filed by one  of
the builder/plaintiffs related to the issues of fees for play  on
the  golf course.  On October 9, 1998, Judge Mark Gibbons of  the
Nevada District Court ruled from the bench that, INTER ALIA,  (i)
the  Company  properly  acquired and now  owns  the  golf  course
property  and  (ii) the individuals covered by the  CC&R's,  I.E.
present  and future record owners of residential lots within  the
Seven  Hills Master-Planned Community, have the right to play  at
the   golf  course  subject  to  the  applicable  rates/fees  and
conditions of the golf course.  The Nevada District Court has set
a  date  of December 21, 1998 for a hearing as to the appropriate
rates/fees  and  conditions for access  to  the  golf  course  by
present  and future record owners of residential lots within  the
Seven Hills Master-Planned Community.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

        NONE

                               16
                                
<PAGE>

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        NONE

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        NONE

ITEM 5. OTHER INFORMATION

        NONE

<TABLE>
<CAPTION>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)  EXHIBITS

        EXHIBIT   DESCRIPTION
        NUMBER    -----------
        -------
        <S>       <C>
        2.1       Agreement  and Plan of Merger,  dated  as  of
                  August  9,  1998, by and among  Rio  Hotel  &
                  Casino,  Inc.,  Harrah's Entertainment,  Inc.
                  and  HEI  Acquisition Corp. III (incorporated
                  by  reference  from Rio's Current  Report  on
                  Form 8-K dated August 9, 1998).
                  
        2.2       First Amendment to the Agreement and Plan  of
                  Merger, dated as of September 4, 1998, by and
                  among  Rio  Hotel  & Casino,  Inc.,  Harrah's
                  Entertainment, Inc. and HEI Acquisition Corp.
                  III  (incorporated  by reference  from  Rio's
                  Current Report on Form 8-K dated September 4,
                  1998).
                  
        10.1      Letter  Agreement dated as of  September  24,
                  1998, by and between the Company and David P.
                  Hanlon; Release Agreement dated as of October
                  9, 1998, by and between the Company and David
                  P.  Hanlon; and Consulting Agreement dated as
                  of  October  9,  1998,  by  and  between  the
                  Company and David P. Hanlon.
                  
        11.1      Computation of Earnings Per Common Share
                  
        27.1      Financial Data Schedule


</TABLE>

     (b)  REPORT ON FORM 8-K

      The  Company filed a Form 8-K dated August 9,  1998,  under
Item  5,  "Other  Events,"  reporting its  proposed  merger  with
Harrah's Entertainment, Inc.

      The Company filed a Form 8-K dated September 4, 1998, under
Item  5,  "Other Events," reporting that the Company and Harrah's
Entertainment,  Inc.  amended the merger agreement  to  eliminate
"pooling of interests" accounting treatment as a condition to the
proposed merger.

                               17

<PAGE>
                                
                            SIGNATURE
                                
      Pursuant to the requirements of the Securities Exchange Act
of  1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.





                                      RIO HOTEL & CASINO, INC.
                                   ------------------------------
                                             (Registrant)
                                  
                                  
                                  
     November 11, 1998               /s/ Ronald J. Radcliffe
------------------------------     ------------------------------
           (Date)                   RONALD J. RADCLIFFE
                                    Vice President, Treasurer and
                                    Chief Financial Officer
                                    (Duly Authorized Officer and
                                     Principal Financial Officer)
                                
                               18

<PAGE>

<TABLE>
<CAPTION>

                          EXHIBIT INDEX


EXHIBIT    DESCRIPTION                                       SEQUENTIAL
NUMBER     -----------                                       PAGE NUMBER
-------                                                      -----------

<S>       <C>                                                <C>
10.1      Letter Agreement dated as of September 24,  1998,        20
          by  and  between the Company and David P. Hanlon;
          Release  Agreement dated as of October  9,  1998,
          by  and  between the Company and David P. Hanlon;
          and  Consulting Agreement dated as of October  9,
          1998,  by  and between the Company and  David  P.
          Hanlon.
                                                          
11.1      Computation of Earnings Per Common Share                 36
                                                          
27.1      Financial Data Schedule                                  38

</TABLE>

                               19