UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, DC.  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                    0-14645
                       -----------------------------------------------
                      DIVERSIFIED HISTORIC INVESTORS II
----------------------------------------------------------------------
        (Exact name of registrant as specified in its charter)

       Pennsylvania                                        23-2361261
-------------------------------                     ------------------
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization                       Identification No.)

                  1609 Walnut Street, Philadelphia, PA   19103
----------------------------------------------------------------------
  (Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code  (215) 557-9800

                                 N/A
----------------------------------------------------------------------
 (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
<PAGE>
                    PART I - FINANCIAL INFORMATION

Item 1.        Financial Statements.

             Consolidated Balance Sheets - September 30, 1998
             (unaudited) and December 31, 1997
             Consolidated Statements of Operations - Three Months and
             Nine Months Ended September 30, 1998 and 1997 (unaudited)
             Consolidated Statements of Cash Flows - Nine Months Ended
             September 30, 1998 and 1997 (unaudited)
             Notes to Consolidated Financial Statements (unaudited)

Item 2.        Management's Discussion and Analysis of
               Financial Condition and Results of Operations.

               (1)  Liquidity

                     As of September 30, 1998, Registrant had cash  of
$201,582.   Cash generated from operations is used primarily  to  fund
operating  expenses  and  debt service.  If cash  flow  proves  to  be
insufficient,   the   Registrant  will  attempt  to   negotiate   loan
modifications with the various lenders in order to remain  current  on
all  obligations.   The  Registrant is not  aware  of  any  additional
sources of liquidity.

                      As   of  September  30,  1998,  Registrant   had
restricted  cash of $1,206,912 consisting primarily of funds  held  as
security  deposits,  replacement reserves and escrows  for  taxes  and
insurance.  As a consequence of the restrictions as to use, Registrant
does not deem these funds to be a source of liquidity.

                     In  recent  years  the  Registrant  has  realized
significant losses, including the foreclosure of one property, due  to
the  properties'  inability to generate sufficient cash  flow  to  pay
their  operating expenses and debt service.  At the present time,  all
three  remaining  properties are able to pay their operating  expenses
and debt service but it is unlikely that any cash will be available to
the Registrant to pay its general and administrative expenses.  In the
legal  proceeding  involving  Morrison  Clark  Inn,  if  Capital  Bank
executes  upon its $1,800,000 judgment with respect to the Registrant,
it  is expected to have a significant adverse impact on the Registrant
since  there is insufficient available cash to pay the judgment.   Any
such  execution  could  result in a forced sale  of  the  Registrant's
remaining  properties.  However, the Registrant has in the  past  been
able  to  obtain  forebearance on execution  for  several  years  upon
payment of a $20,000 fee to the judgment creditor and believes it  may
be  able  to do so when the current forebearance period ends  in  July
1999.  See Part II. Item 1.  Legal Proceedings.

                     It  is the Registrant's intention to continue  to
hold  the  properties until they can no longer meet the  debt  service
requirements  (or,  as  described above,  Capital  Bank  executes  its
judgment  against the Registrant), and the properties are  foreclosed,
or  the market value of the properties increases to a point where they
can  be  sold  at a price which is sufficient to repay the  underlying
indebtedness (principal plus accrued interest).

               (2)  Capital Resources

                     Due  to the relatively recent rehabilitations  of
the   properties,  any  capital  expenditures  needed  are   generally
replacement  items  and  are funded out of  cash  from  operations  or
replacement  reserves, if any.  The Registrant is  not  aware  of  any
factors which would cause historical capital expenditure levels not to
be  indicative of capital requirements in the future and  accordingly,
does  not  believe that it will have to commit material  resources  to
capital investment for the foreseeable future.

               (3)  Results of Operations

                     During  the  third  quarter of  1998,  Registrant
incurred a net loss of $796,560 ($38.29 per limited partnership  unit)
compared  to  a  net loss of $566,650 ($27.24 per limited  partnership
unit) for the same period in 1997.  For the first nine months of 1998,
the  Registrant incurred a net loss of $2,048,836 ($98.50 per  limited
partnership  unit) compared to a net loss of $2,218,885  ($106.67  per
limited partnership unit) for the same period in 1997.

                    Rental income increased $42,414 from $1,153,992 in
the third quarter of 1997 to $1,196,406 in the same period in 1998 and
increased $110,500 from $3,345,961 for the first nine months  of  1997
to  $3,456,461  in  the same period on 1998.  The increase  in  rental
income for both the third quarter and the first nine months of 1998 as
compared  to the same periods in 1997 is the result of an increase  in
residential rental income at both Tindeco Wharf and Washington  Square
due  to an increase in the average rental rates partially offset by  a
decrease in rental income of the commercial space at Factor's Walk due
to a decrease in the average rental rates of the commercial space.

                     Hotel  income increased $40,629 from $317,719  in
the  third quarter of 1997 to $358,348 in the same period in 1998  and
increased $213,711 from $958,810 for the first nine months of 1997  to
$1,172,521 for the same period in 1998.  The increase in hotel  income
for  both  the  third quarter and the first nine  months  of  1998  as
compared to the same periods in 1997 is the result of increases in the
average room rates for the third quarter ($104.82 to $130.32) and  for
the  first  nine  months ($104.42 to $129.86) partially  offset  by  a
decrease in the average occupancy for the third quarter (74% to 67%).

                    Expense for rental operations increased by $22,758
from  $457,267 in the third quarter of 1997 to $480,025  in  the  same
period  in  1998 and increased $16,602 from $1,355,450 for  the  first
nine months of 1997 to $1,372,052 for the same period in 1998.  Rental
operations expense increased from the third quarter and the first nine
months  of 1997 to the same periods in 1998 due to an overall increase
in  rental  operations expense at Tindeco Wharf and Washington  Square
due to increases in the rental income.

                     Hotel operations expense increased $111,192  from
$284,224  in the third quarter of 1997 to $395,416 in the same  period
in  1998.   The  increase in hotel operations expense was  due  to  an
overall increase due to increase in the average rental income.

                     Hotel  operations expense decreased $48,073  from
$1,099,746  for  the first nine months of 1997 to $1,051,673  for  the
same period in 1998.  The decrease in hotel operations expense was due
to  a  misclassification  of payments on  a  note  payable  where  the
payments should have been classified as administrative expenses.   The
misapplication was corrected in the second quarter of 1997.

                     Interest expense increased $181,879 from $833,251
in the third quarter of 1997 to $1,015,130 in the same period in 1998,
and  increased $181,879 from $2,684,107 for the first nine  months  of
1997 to $2,865,986 for the same period in 1998.  The increase from the
third quarter and the first nine months of 1997 to the same periods in
1998  is  due  to  an  increase in the principal  balance  upon  which
interest is calculated at Tindeco Wharf and Factor's Walk.

                      Losses  incurred  during  the  quarter  at   the
Registrant's three properties amounted to $627,000, compared to a loss
of  approximately $532,000 for the same period in 1997.  For the first
nine  months  of 1998, the Registrant's three properties recognized  a
loss  of $1,668,000 compared to approximately $1,965,000 for the  same
period in 1997.

                     In the third quarter of 1998, Registrant incurred
a loss of $330,000 at Tindeco Wharf including $288,000 of depreciation
and  amortization expense, compared to a loss of $330,000 in the third
quarter  of  1997, including $288,000 of depreciation and amortization
expense.   Although there was no overall change in the loss  from  the
third  quarter  of  1997  to the same period in  1998,  there  was  an
increase  in  residential rental income due  to  an  increase  in  the
average rental rates combined with an increase in interest income  due
to higher cash balances maintained by the property partially offset by
an  overall  increase in operating expenses due  to  the  increase  in
rental  income and an increase in interest expense.  Interest  expense
increased  due  to  an increase in the principal  balance  upon  which
interest is calculated at Tindeco Wharf.

                     For  the  first  nine months of 1998,  Registrant
incurred  a loss of $1,023,000 at Tindeco Wharf including $863,000  of
depreciation  and  amortization  expense,  compared  to  a   loss   of
$1,136,000  for  the  same  period  in  1997,  including  $853,000  of
depreciation  and amortization expense.  The decreased loss  from  the
first nine months of 1997 to the same period in 1998 is the result  of
an  increase  in residential rental income due to an increase  in  the
average rental rates combined with an increase in interest income  due
to  higher  cash balances maintained by the property,  a  decrease  in
legal fees partially offset by an increase in interest expense and  an
overall  increase in operating expenses due to the increase in  rental
income.   Legal fees decreased due to fees incurred in the first  nine
months  of  1997  in connection with a review of the  underlying  loan
documents.   Interest  expense increased due to  an  increase  in  the
principal balance upon which interest is calculated at Tindeco Wharf.

                     In the third quarter of 1998, Registrant incurred
a  loss  of  $285,000  at The River Street Inn  including  $93,000  of
depreciation expense, compared to a loss of $190,000 including $93,000
of  depreciation expense in the second quarter of 1997.  The increased
loss from the third quarter of 1997 to the same period in 1998 is  the
result  of  an  increase  in  interest and  hotel  operations  expense
partially  offset  by an increase in hotel income.   Interest  expense
increased due to an increase in the average principal balances of  the
notes  upon  which  interest  is accrued.   Hotel  operations  expense
increased  due  to  an increase in the average rental  income.   Hotel
income increased due to an increase in the average room rates ($104.82
to  $130.32)  partially offset by a decrease in the average  occupancy
(74% to 67%).

                     For  the  first  nine months of 1998,  Registrant
incurred a loss of $652,000 at The River Street Inn including $278,000
of  depreciation expense, compared to a loss of $822,000 for the  same
period  in  1997,  including  $278,000 of depreciation  expense.   The
decrease  in the loss from the first nine months of 1997 to  the  same
period  in 1998 is the result of an increase in hotel income  combined
with  a  decrease  in administrative expenses partially  offset  by  a
decrease  in  rental income relating to the commercial  space.   Hotel
income increased due to an increase in the average room rates ($104.42
to   $129.86).    Administrative   expense   decreased   due   to    a
misclassification  of payments on a note payable  where  the  payments
should   have   been  classified  as  administrative  expenses.    The
misclassification was corrected in the second quarter of 1997.  Rental
income decreased due to a decrease in the average rental rates of  the
commercial space.

                     In the third quarter of 1998, Registrant incurred
a   loss  of  $12,000  at  Washington  Square,  including  $29,000  of
depreciation expense, compared to a loss of $12,000 including  $27,000
of  depreciation expense in the second quarter of 1997  and,  for  the
first  nine  months  of 1998, recognized income  of  $7,000  including
$86,000 of depreciation expense, compared to a loss of $7,000 for  the
same  period in 1997, including $55,000 of depreciation expense.   The
decrease  in  the loss from the third quarter and the  realization  of
income in the first nine months of 1998 from the same periods in  1997
is due to an increase in rental income due to increases in the average
occupancy (90% to 96%) for the third quarter and (92% to 97%) for  the
first  nine months partially offset by an overall increase  in  rental
operations expense due to the increase in the average occupancy.
<PAGE>

                   DIVERSIFIED HISTORIC INVESTORS II
                 (a Pennsylvania limited partnership)
                                   
                      CONSOLIDATED BALANCE SHEETS
                                   
                                   
                                Assets

                                       September 30, 1998    December 31, 1997
                                           (Unaudited)
Rental properties, at cost:                                           
Land                                      $   934,582             $   934,582
Buildings and improvements                 40,243,083              39,666,989
Furniture and fixtures                      2,894,295               2,866,600
                                           ----------              ----------  
                                           44,071,960              43,468,171
Less - Accumulated depreciation           (20,731,201)            (19,522,725)
                                           ----------              ----------
                                           23,340,759              23,945,446
                                                                      
Cash and cash equivalents                     201,582                  71,023
Restricted cash                             1,206,912               1,293,871
Accounts and notes receivable                  45,674                  48,911
Other assets (net of amortization of                            
$347,608 and $288,791 at September 30,                            
1998 and December 31, 1997, respectively)   1,856,599               1,784,502
                                           ----------              ----------
       Total                              $26,651,526             $27,143,753
                                           ==========              ==========
                   Liabilities and Partners' Equity

Liabilities:
Debt obligations                          $32,654,174             $32,712,165
Accounts payable:                                                     
       Trade                                2,873,432               2,565,803
       Related parties                      1,355,597                 345,603
Interest payable                           10,807,052               9,576,402
Accrued liabilities                         1,317,200               2,260,486
Tenant security deposits                      252,301                 242,687
                                           ----------              ---------- 
       Total liabilities                   49,259,756              47,703,146
                                           ----------              ----------
Partners' equity                          (22,608,230)            (20,559,393)
                                           ----------              ---------- 
       Total                              $26,651,526             $27,143,753
                                           ==========              ==========

The accompanying notes are an integral part of these financial statements.
<PAGE>

                   DIVERSIFIED HISTORIC INVESTORS II
                 (a Pennsylvania limited partnership)
                                   
                 CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 1998 and 1997
                              (Unaudited)

                                 Three months                Nine months
                             Ended September 30,         Ended September 30,
                             1998          1997          1998          1997

Revenues:                                                               
 Rental income            $1,196,406    $1,153,992    $3,456,461    $3,345,961
 Hotel income                358,348       317,719     1,172,521       958,810
 Interest income              11,294         7,294        27,709        18,320
                           ---------     ---------     ---------     ---------
   Total revenues          1,566,048     1,479,005     4,656,691     4,323,091
                           ---------     ---------     ---------     ---------
Costs and expenses:                                            
 Rental operations           480,025       457,267     1,372,052     1,355,450
 Hotel operations            395,416       284,224     1,051,673     1,099,746
 General and                                                      
   Administrative             49,500        49,500       148,500       148,500
 Interest                  1,015,130       833,251     2,865,986     2,684,107
 Depreciation and                                                
   Amortization              422,537       421,413     1,267,316     1,254,173
                           ---------     ---------     ---------     ---------
   Total costs and                                           
            Expenses       2,362,608     2,045,655     6,705,527     6,541,976
                           ---------     ---------     ---------     ---------
Net loss                 ($  796,560)  ($  566,650)  ($2,048,836)  ($2,218,885)
                           =========     =========     =========     =========
Net loss per limited   
 Partnership unit        ($    38.29)  ($    27.24)  ($    98.50)  ($   106.67)
                           =========     =========     =========     =========

The accompanying notes are an integral part of these financial statements.
<PAGE>
                   DIVERSIFIED HISTORIC INVESTORS II
                 (a Pennsylvania limited partnership)
                                   
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
         For the Nine Months Ended September 30, 1998 and 1997
                              (Unaudited)

                                                        Nine months ended
                                                          September  30,
                                                       1998           1997

Cash flows from operating activities:                                         
 Net loss                                          ($2,048,836)    ($2,218,885)
 Adjustments to reconcile net loss to net cash 
   provided by operating activities:
Depreciation and amortization                        1,267,316       1,254,173
Changes in assets and liabilities:                                            
 Decrease in restricted cash                            86,959         453,772
 Decrease (increase) in accounts receivable              3,237         (27,591)
 Increase in other assets                             (130,938)       (165,564)
 Increase in accounts payable - trade                  307,629         323,900
 Increase in accounts payable - related parties      1,009,994         272,610
 Increase in interest payable                        1,230,650       1,105,829
 Decrease in accrued liabilities                      (943,286)        (57,835)
 Increase in tenant security deposits                    9,614          11,012
                                                     ---------       ---------
 Net cash provided by operating activities             792,339         951,421
                                                     ---------       ---------
Cash flows from investing activities:                                         
 Capital expenditures                                 (603,789)       (156,227)
                                                     ---------       ---------
Net cash used in investing activities                 (603,789)       (156,227)
                                                     ---------       --------- 
Cash flows from financing activities:                                         
 Principal payments                                    (57,991)       (678,219)
                                                     ---------       ---------
 Net cash used in financing activities                 (57,991)       (678,219)
                                                     ---------       ---------
Increase in cash and cash equivalents                  130,559         116,975
                                                                              
Cash and cash equivalents at beginning of period        71,023          79,567
                                                     ---------       ---------
Cash and cash equivalents at end of period          $  201,582      $  196,542
                                                     =========       =========

The accompanying notes are an integral part of these financial statements.
<PAGE>

                   DIVERSIFIED HISTORIC INVESTORS II
                 (a Pennsylvania limited partnership)

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              (Unaudited)


NOTE 1 - BASIS OF PRESENTATION

The   unaudited  consolidated  financial  statements  of   Diversified
Historic  Investors II (the "Registrant") and related notes have  been
prepared  pursuant to the rules and regulations of the Securities  and
Exchange  Commission.  Accordingly, certain information  and  footnote
disclosures  normally  included in financial  statements  prepared  in
accordance  with  generally accepted accounting principles  have  been
omitted  pursuant  to  such rules and regulations.   The  accompanying
consolidated financial statements and related notes should be read  in
conjunction with the audited financial statements in Form 10-K of  the
Registrant, and notes thereto, for the year ended December 31, 1997.

The  information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for  a
fair presentation of the results of the interim periods presented.

                      PART II - OTHER INFORMATION

Item 1.        Legal Proceedings

                In May 1992, a Partnership 69% owned by the Registrant
filed  a  reorganization petition pursuant to Chapter 11 of  the  U.S.
Bankruptcy Code in order to forestall foreclosure by a lender  on  the
property  owned by it.  In addition, the lender filed a claim  against
the  Registrant on its guaranty of payment of its debt.   In  February
1993,  the lender, with permission of the bankruptcy court, foreclosed
on  the property.  In November 1993, the lender obtained a judgment in
the matter of Capital Bank, N.A. v. Diversified Historic Investors  II
in  the  amount  of  $1,800,000.  In return for  payment  of  $20,000,
Capital  Bank  has agreed to forebear from executing on  the  judgment
until July 6, 1999.

Item 4.        Submission of Matters to a Vote of Security Holders

                No matter was submitted during the quarter covered  by
this report to a vote of security holders.

Item 6.        Exhibits and Reports on Form 8-K

               (a)  Exhibit     Document
                    Number

                      3         Registrant's  Amended and Restated  Certificate
                                of   Limited   Partnership  and  Agreement   of
                                Limited  Partnership, previously filed as  part
                                of    Amendment    No.   2   of    Registrant's
                                Registration  Statement  on  Form   S-11,   are
                                incorporated herein by reference.
                                                
                     21         Subsidiaries  of the Registrant are  listed  in
                                Item  2.  Properties on Form  10-K,  previously
                                filed and incorporated herein by reference.

               (b)  Reports on Form 8-K:

                    No  reports  were  filed  on  Form  8-K  during  the
                    quarter ended September 30, 1998.
<PAGE>
                              SIGNATURES

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

Date:  December 14, 1998         DIVERSIFIED HISTORIC INVESTORS II
       -----------------
                                 By: Dover Historic Advisors, General Partner
                                        
                                     By: EPK, Inc., Partner
                                                  
                                         By: /s/ Spencer Wertheimer
                                             ----------------------
                                             SPENCER WERTHEIMER
                                             President and Treasurer