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                 March 31, 1996
                               -------------------------------------------------

                                       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.)

              Suite 500, 1521 Locust Street, Philadelphia, PA  19102
--------------------------------------------------------------------------------
               (Address of principal executive offices)      (Zip Code)

Registrant's telephone number, including area code       (215) 735-5001
                                                  ------------------------------
                                       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    No X
                                           ---   ---


<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

                Consolidated  Balance  Sheets - March 31, 1996  (unaudited)  and
                December 31, 1995

                Consolidated Statements of Operations - Three Months Ended March
                31, 1996 and 1995 (unaudited)

                Consolidated Statements of Cash Flows - Three Months Ended March
                31, 1996 and 1995 (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 March 31, 1996,  Registrant  had cash of $97,727.
Such  funds  are  expected  to be  used  to  pay  liabilities  and  general  and
administrative  expenses  of  Registrant,  and  to  fund  cash  deficits  of the
properties.  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 March 31, 1996, Registrant had restricted cash of
$754,178  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 Factor's Walk, if the final outcome
were to be adverse to the  Registrant,  the property could be  foreclosed.  If a
foreclosure were to occur, it is not likely to have a significant  impact on the
Registrant's liquidity, as this property has generated little or no cash flow to
the Registrant.  In addition,  if Capital Bank executes on its judgment  against
the Registrant,  it is expected to have  significant  impact on the Registrant's
liquidity  as no cash will be  available  to pay the  operating  expenses of the
properties. 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 and
the properties are foreclosed,  or the market value of the properties  increases

                                      -2-
<PAGE>

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. In the
first quarter of 1996,  the  Registrant  executed a lease between  Factor's Walk
Partners ("FWP") and the building adjacent to it with the intention of expanding
the River  Street Inn. The source of financing  for this  expansion  has not yet
been  identified.  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 first quarter of 1996, Registrant incurred a
net loss of $811,287  ($39.00 per limited  partnership  unit)  compared to a net
loss of $643,334  ($30.93 per limited  partnership  unit) for the same period in
1995.

                         Rental and hotel income combined increased $48,000 from
$1,270,000  in the first  quarter of 1995 to  $1,318,000  in the same  period in
1996. This increase resulted from an increase of $33,000 in rental income and an
increase of $15,000 in hotel income. The increase in rental income is the result
of an increase in residential  rental income at Tindeco Wharf due to an increase
in the  average  rental  rates in the first  quarter of 1996 as  compared to the
first  quarter of 1995.  Hotel income  increased due to an increase in occupancy
(71% to 75%) and an increase in average room rates ($86.23 to $94.52).

                         Interest  income  decreased  from  $9,000  in the first
quarter of 1995 to $5,000 in the same period in 1996.  The decline is the result
of less cash held in interest  bearing  accounts in the first quarter of 1996 as
compared to the same period in 1995.

                         Expense for rental operations increased by $57,000 from
$385,000  in the first  quarter of 1995 to  $442,000 in the same period in 1996.
Rental operations  expense increased due to increased  maintenance and utilities
expense at Washington  Square resulting from inclement  weather in the winter of
1995 and an increase in utilities,  management fees and legal expense at Tindeco
Wharf.  Utilities  increased  due to an  increase in average  consumption  while
management  fees  increased  due to the  increase in rental  income.  Legal fees
increased due to fees incurred in connection with the approval by the Department
of Housing and Urban Development  ("HUD") of a new management  agreement.  Hotel
operations expense increased $140,000 from $319,000 in the first quarter of 1995
to $459,000 in the same period in 1996. The increase in hotel operations was due
to an increase in commissions  and  maintenance  expense  partially  offset by a
decrease in legal fees.  Commissions expense increased due to the execution of a

                                      -3-
<PAGE>

lease between  Factor's  Walk Partners and the building  adjacent to it with the
intention of expanding the River Street Inn.  Maintenance  expense increased due
to repairs made to the air conditioning unit at the River Street Inn. Legal fees
decreased due to a retainer paid in connection with the filing of an appeal to a
lawsuit in 1994.

                         Interest expense increased $15,000 from $751,000 in the
first quarter of 1995 to $766,000 in the same period in 1996.  Interest  expense
increased  due to an increase in the  principal  balance upon which  interest is
calculated at Tindeco Wharf.

                         Losses incurred during the quarter at the  Registrant's
three  properties  amounted to  $697,000,  compared  to a loss of  approximately
$529,000 for the same period in 1995.

                         In the first  quarter  of 1996,  Registrant  incurred a
loss of  $417,000  at Tindeco  Wharf  including  $288,000  of  depreciation  and
amortization  expense,  compared to a loss of  $419,000 in the first  quarter of
1995,  including $288,000 of depreciation  expense.  The decreased loss from the
first  quarter of 1995 to the first quarter of 1996 is the result of an increase
in  residential  rental  income due to an increase in the average  rental  rates
partially  offset  by an  increase  in  utilities,  management  fees,  legal and
interest expense and a decrease in interest income.  Utilities  increased due to
an increase in average  consumption  while  management fees increased due to the
increase  in  rental  income.  Legal  fees  increased  due to fees  incurred  in
connection  with the  approval by HUD of a new  management  agreement.  Interest
expense  increased  due to an  increase  in the  principal  balance  upon  which
interest is calculated and interest income decreased due the result of less cash
held in interest bearing accounts. Registrant anticipates that operating results
in the  following  quarters  will be similar to those  experienced  in the first
quarter of 1996.

                         In the first  quarter  of 1996,  Registrant  incurred a
loss of  $263,000  at The River  Street Inn  including  $89,000 of  depreciation
expense,  compared  to a loss of  $117,000  including  $89,000  of  depreciation
expense in the first quarter of 1995.  The increased loss from the first quarter
of 1995 to the same period in 1996 is the result of an  increase in  commissions
and  maintenance  expense  partially  offset by a decrease  in legal fees and an
increase in hotel income.  Commissions expense increased due to the execution of
a lease between Factor's Walk Partners and the building  adjacent to it with the
intention of expanding the River Street Inn.  Maintenance  expense increased due
to repairs made to the air  conditioning  unit. Hotel income increased due to an
increase in occupancy (71% to 75%) and an increase in average room rates ($86.23
to $94.52).  Legal fees decreased due to a retainer paid in connection  with the
filing of an appeal to a lawsuit in 1994.

                         In the first  quarter  of 1996,  Registrant  incurred a
loss of $16,000 at Washington Square, including $28,000 of depreciation expense,
compared to income of $6,000  including  $28,000 of depreciation  expense in the
first quarter of 1995. Rental operations expense increased due to an increase in
maintenance and utilities  expense due to the inclement  weather  experienced in
the winter of 1996.  Registrant  anticipates  that the results in the  following
quarters  will be more  favorable to those  experienced  in the first quarter of
1996.

                                      -4-
<PAGE>




                        DIVERSIFIED HISTORIC INVESTORS II
                      (a Pennsylvania limited partnership)

                           CONSOLIDATED BALANCE SHEETS


                                     Assets

                                        March 31, 1996   December 31, 1995
                                         ------------      ------------
                                         (Unaudited)
Rental properties, at cost:
    Land                                 $    934,582      $    934,582
    Buildings and improvements             39,484,131        39,414,132
    Furniture and fixtures                  2,650,472         2,650,472
                                         ------------      ------------

                                           43,069,185        42,999,186
    Less - Accumulated depreciation       (16,618,512)      (16,210,001)
                                         ------------      ------------
                                           26,450,673        26,789,185

Cash and cash equivalents                      97,004           114,922
Restricted cash                               908,846           692,027
Accounts and notes receivable                  52,090            50,030
Other assets (net of amortization of
 $189,195 and $180,216 at March 31,
 1996 and December 31, 1995,
 respectively)
                                            1,630,934         1,772,484
                                         ------------      ------------

         Total                           $ 29,139,547      $ 29,418,648
                                         ============      ============

                        Liabilities and Partners' Equity

Liabilities:
    Debt obligations                     $ 33,106,104      $ 33,161,299
    Accounts payable:
         Trade                              1,081,942           866,737
         Related parties                      664,409           678,569
    Interest payable                        7,336,470         6,928,557
    Accrued liabilities                     2,368,936         2,381,497
    Tenant security deposits                  232,688           241,704
                                         ------------      ------------

         Total liabilities                 44,790,549        44,258,363
                                         ------------      ------------

Partners' equity                          (15,651,002)      (14,839,715)
                                         ------------      ------------

         Total                           $ 29,139,547      $ 29,418,648
                                         ============      ============

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

                                      -5-
<PAGE>


                        DIVERSIFIED HISTORIC INVESTORS II
                      (a Pennsylvania limited partnership)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
               For the Three Months Ended March 31, 1996 and 1995
                                   (Unaudited)


                                          Three months     Three months
                                              ended            ended
                                            March 31,        March 31,
                                              1996             1995
                                           -----------      -----------
Revenues:
    Rental income                          $ 1,020,900      $   987,900
    Hotel income                               296,943          281,616
    Interest income                              4,706            9,350
                                           -----------      -----------

         Total revenues                      1,322,549        1,278,866
                                           -----------      -----------

Costs and expenses:
    Rental operations                          441,769          385,228
    Hotel operations                           458,975          318,616
    General and administrative                  49,500           49,500
    Interest                                   766,046          751,366
    Depreciation and amortization              417,546          417,490
                                           -----------      -----------

         Total costs and expenses            2,133,836        1,922,200
                                           -----------      -----------

Net loss                                  ($   811,287)    ($   643,334)
                                           ===========      ===========

Net loss per limited partnership unit     ($     39.00)    ($     30.93)
                                           ===========      ===========






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

                                      -6-
<PAGE>


                        DIVERSIFIED HISTORIC INVESTORS II
                      (a Pennsylvania limited partnership)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the Three Months Ended March 31, 1996 and 1995
                                   (Unaudited)

                                                          Three months ended
                                                               March 31,
                                                          1996           1995
                                                       ---------      ---------

Cash flows from operating activities:
   Net loss                                            ($811,287)     ($643,334)
   Adjustments to reconcile net loss to net cash
   provided by operating activities:
Depreciation and amortization                            417,546        417,490
Changes in assets and liabilities:
   Increase in restricted cash                          (216,819)      (147,139)
   Increase in accounts receivable                        (2,060)        (1,108)
   Decrease in other assets                              132,515        123,631
   Increase in accounts payable - trade                  215,205         90,163
   Decrease in accounts payable - related parties        (14,160)      (137,762)
   Increase in interest payable                          407,913        209,976
   (Decrease) increase in accrued liabilities            (12,561)       165,833
   (Decrease) increase in tenant security deposits        (9,016)           271
                                                       ---------      ---------

   Net cash provided by operating activities             107,276         78,021
                                                       ---------      ---------

Cash flows from investing activities:
   Capital expenditures                                  (69,999)       (23,240)
                                                       ---------      ---------

Net cash used in investing activities                    (69,999)       (23,240)
                                                       ---------      ---------

Cash flows from financing activities:
   Principal payments                                    (55,195)       (58,394)
                                                       ---------      ---------

   Net cash used in financing activities                 (55,195)       (58,394)
                                                       ---------      ---------

Decrease in cash and cash equivalents                    (17,918)        (3,163)

Cash and cash equivalents at beginning of period         114,922        101,340
                                                       ---------      ---------

Cash and cash equivalents at end of period             $  97,004      $  97,727
                                                       =========      =========

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

                                      -7-
<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, 1995.

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.


                                      -8-
<PAGE>


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

The Registrant has been involved in two legal proceedings as discussed below:

                  (a) J. A. Jones Construction Company ("Jones") contracted with
Factor's  Walk  Partners  ("FWP") for the  renovation  of what was  originally a
warehouse,  into  the  River  Street  Inn/Factor's  Walk.  During  construction,
numerous  disputes  arose  between the parties.  As a result of those  disputes,
Jones  abandoned the project prior to completion and filed suit in the matter of
J.A. Jones  Construction  Company v. Factor's Walk Partners in the United States
District  Court for the Northern  District of Georgia.  On January 1, 1994,  the
court  entered a  judgment  in favor of Jones and  against  FWP in the amount of
$1,069,017.  The judgment  accrues  interest at 9.5% and $15,390 of interest was
accrued  in the first  quarter of 1996.  FWP filed an appeal and this  appeal is
currently held in abeyance while FWP and Jones  participate in a court sponsored
settlement  program.  Because of the  complexity of the factual and legal issues
involved,  it is impossible to predict with any  reasonable  degree of certainty
the  outcome of the  appeal.  A final  outcome  adverse  to FWP is a  reasonable
probability.  However,  FWP continues to participate in negotiations with Jones,
which the Registrant  believes will lead to a settlement  that will allow FWP to
retain  ownership  of the  property.  If no  settlement  occurs  and an  adverse
appellate ruling is handed down, the property could be foreclosed.

                  (b) In May 1992,  a  Partnership  69% owned by the  Registrant
filed a reorganization  petition  pursuant to Chapter 11 of the U.S.  Bankruptcy
Code to  forestall  foreclosure  on the  property  owned by it by a  lender.  In
addition,  the lender filed a claim  against the  Registrant  on its guaranty of
payment of both notes.  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,
1996. Although there have been no discussions,  the Registrant  anticipates that
it will be able to  extend  the  forbearance  agreement  for  several  years for
similar consideration.

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.


                                      -9-
<PAGE>


Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibit Number                                  Document

            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 March 31, 1996.


                                      -10-
<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:  May 13, 1996               DIVERSIFIED HISTORIC INVESTORS II
       ------------

                                    By: Dover Historic Advisors, General Partner

                                        By: DHP, Inc., Partner

                                            By:       /s/ Donna M. Zanghi
                                               ---------------------------------
                                                      DONNA M. ZANGHI,
                                                      Secretary and Treasurer


                                      -11-