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

      
(Mark One) 
    X  QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934
             For the quarterly period ended December 31, 1997
                                     
                                    OR
           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                   THE SECURITIES EXCHANGE ACT OF 1934
       For the transition period from             to             .
                                     
For Quarter Ended December 31, 1997    Commission file number 1-9915
                                     
                      GAYLORD CONTAINER CORPORATION
          (Exact name of registrant as specified in its charter)
                                     
            Delaware                          36-3472452
      (State or other jurisdiction of               (I.R.S. Employer
      incorporation or organization)           Identification No.) 

                      500 Lake Cook Road, Suite 400
                        Deerfield, Illinois  60015
                        Telephone: (847) 405-5500
      (Address, including zip code, and telephone number, including
              area code, of registrant's principal offices)
                                     
                                     
    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 by check mark whether the registrant has filed all documents and 
reports required to be filed by Section 12, 13, or 15(d) of the Securities 
Exchange Act of 1934 subsequent to the distribution of securities under a plan 
confirmed by a court.  Yes  X    No     


    As of February 2, 1998, the registrant had outstanding 53,060,718 shares 
of its $0.0001 par value Class A Common Stock (including 1,917,059 shares 
held in trust for the benefit of the warrant holders) and 1,917,059 redeemable 
exchangeable warrants to obtain Class A Common Stock.
<PAGE>
                                                     






                                                                   PAGE
PART I.  FINANCIAL INFORMATION                                    NUMBERS
------------------------------                                    -------
Item 1.     Financial Statements                                   1 - 7

Item 2.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations                    8 - 11


PART II.  OTHER INFORMATION
---------------------------
Item 1.     Legal Proceedings                                        12

Item 2.     Changes in Securities                                    12

Item 3.     Defaults Upon Senior Securities                          12

Item 4.     Submission of Matters to a Vote of Security Holders      12
  
Item 5.     Other Information                                        12

Item 6.     Exhibits and Reports on Form 8-K                         12


SIGNATURES                                                           13

<PAGE>

<TABLE>
<CAPTION>

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------

CONDENSED CONSOLIDATED BALANCE SHEETS,
DECEMBER 31, 1997 AND SEPTEMBER 30, 1997                                     
------------------------------------------------------------------------------
                                                  DECEMBER 31,  SEPTEMBER 30,
                                                      1997          1997     
                                                  ------------  -------------
<S>                                                  <C>            <C>
ASSETS                                                 (In millions)         
CURRENT ASSETS:
 Cash and equivalents                                 $    5.6       $    6.1
 Trade receivables (less allowances of
  $6.0 million and $5.5 million, respectively)           101.2          100.6
 Inventories (Note 2)                                     88.2           77.4
 Deferred Income taxes                                     4.7            4.7
 Other current assets                                     13.6           15.4
                                                       -------        -------  
  Total current assets                                   213.3          204.2
                                                       -------        ------- 
PROPERTY, PLANT AND EQUIPMENT:
 Property, plant and equipment, at cost                1,080.5        1,061.5
 Less accumulated depreciation                           488.3          475.4
                                                       -------        -------
  Property - net                                         592.2          586.1
                                                       -------        -------

DEFERRED INCOME TAXES                                     81.1           71.2

OTHER ASSETS                                              68.2           68.4
                                                       -------        -------
  TOTAL                                               $  954.8       $  929.9
                                                       =======        =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Current maturities of long-term debt                 $   14.6       $   14.4
 Trade payables                                           59.7           65.2
 Accrued interest payable                                  8.2           26.3
 Accrued and other liabilities                            49.8           61.4
                                                       -------        -------
  Total current liabilities                              132.3          167.3
                                                       -------        -------

LONG-TERM DEBT                                           780.0          701.7

OTHER LONG-TERM LIABILITIES                               26.4           26.3

COMMITMENTS AND CONTINGENCIES (Note 3)                     -              -

STOCKHOLDERS' EQUITY:
 Class A common stock - par value, $.0001 per share;
  authorized 125,000,000 shares; issued 54,595,513
  shares and 54,573,164 shares, respectively, and
  outstanding 53,057,425 shares and 53,026,961
  shares, respectively                                     -              -
 Capital in excess of par value                          175.8          175.6
 Retained deficit                                       (146.9)        (128.1)
 Common stock in treasury - at cost; 1,538,088
  shares and 1,546,203 shares, respectively              (11.3)         (11.4)
 Recognition of minimum pension liability                 (1.5)          (1.5)
                                                       -------        -------
 Total stockholders' equity                               16.1           34.6
                                                       -------        -------
  TOTAL                                               $  954.8       $  929.9
                                                       =======        =======
</TABLE>

 See notes to condensed consolidated financial statements.

                                         1

<PAGE>
<TABLE>
<CAPTION>

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES                               
----------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996 (In millions, except per share data)              
-----------------------------------------------------------------------------
                                              THREE MONTHS ENDED DECEMBER 31,
                                              -------------------------------
                                                         1997           1996  
                                                        ------         ------
<S>                                                   <C>            <C>
NET SALES                                              $ 197.6        $ 195.6
COST OF GOODS SOLD                                       186.1          174.2
                                                        ------         ------
GROSS MARGIN                                              11.5           21.4
SELLING AND ADMINISTRATIVE COSTS                         (20.6)         (20.5)
                                                        ------         ------
OPERATING EARNINGS (LOSS)                                 (9.1)           0.9
INTEREST EXPENSE - Net                                   (21.1)         (19.4)
OTHER INCOME (EXPENSE) - Net                              (0.2)           0.8
                                                        ------         ------
LOSS BEFORE TAXES                                        (30.4)         (17.7)
INCOME TAXES                                             (11.6)          (8.0)
                                                        ------         ------
NET LOSS                                                 (18.8)       $  (9.7)
                                                                       ======

RETAINED DEFICIT:
 BEGINNING OF PERIOD                                    (128.1)     
                                                        ------
 END OF PERIOD                                         $(146.9)
                                                        ======
 
LOSS PER COMMON SHARE: (A)                             $ (0.35)       $ (0.18)
                                                        ======         ======

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: (A)          53.0           52.7
                                                        ======         ======
</TABLE>

See notes to condensed consolidated financial statements.


(A) Diluted loss per share and corresponding average potential shares 
    outstanding have not been presented because of their antidilutive nature 
    (see Note 4). 

                                         2
<PAGE>

<TABLE>
<CAPTION>

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996                                                   
------------------------------------------------------------------------------
                                               THREE MONTHS ENDED DECEMBER 31, 
                                               -------------------------------
                                                       1997              1996   
                                                      ------            ------
                                                           (In millions)      
<S>                                                  <C>               <C>
CASH FLOWS FROM OPERATIONS:
 Net loss                                            $ (18.8)          $  (9.7)
 Adjustments to reconcile net loss
  to net cash from operating activities:
   Depreciation and amortization                        16.6              16.3
   Deferred tax provision                               (9.9)             (6.4)
   Change in current assets and liabilities,
      excluding acquisitions and dispositions          (41.8)            (36.3)
   Other - net                                          (0.1)             (2.1)
                                                      ------            ------
Net cash used for operations                           (54.0)            (38.2)
                                                      ------            ------
CASH FLOWS FROM INVESTMENTS:
 Capital expenditures                                  (14.6)             (8.4)
 Capitalized interest                                   (0.3)             (0.2)
 Other investments - net                                 0.2               0.4
                                                      ------            ------
Net cash used for investments                          (14.7)             (8.2)
                                                      ------            ------
CASH FLOWS FROM FINANCING:
 Senior debt - repayments                               (3.0)             (2.1)
 Debt issuance costs                                     -                 0.1 
 Revolving credit agreement borrowings - net            71.0              12.5
 Other financing - net                                   0.2               0.2
                                                      ------            ------
Net cash provided by financing                          68.2              10.7 
                                                      ------            ------
Net decrease in cash and equivalents                    (0.5)            (35.7)
Cash and equivalents, beginning of period                6.1              39.2
                                                      ------            ------
Cash and equivalents, end of period                  $   5.6           $   3.5
                                                      ======            ======

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid (refunded) for:
  Interest                                           $  38.7           $  37.3
                                                      ======            ======

  Income taxes                                       $  (0.2)          $   - 
                                                      ======            ======

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
 AND FINANCING ACTIVITIES:
   Property additions                                $   8.9           $   - 
                                                      ======            ======

   Increase in total debt                            $  10.5           $   - 
                                                      ======            ======

   Decrease in accrued and other liabilities         $   1.6           $   - 
                                                      ======            ======

</TABLE>
See notes to condensed consolidated financial statements.


                                         3
                                         
<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                   
------------------------------------------------------------------------------

1. GENERAL
   -------

In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all normal and recurring
adjustments and accruals necessary to present fairly the financial
position as of December 31, 1997 and the results of operations and
cash flows for the three months ended December 31, 1997 and 1996,
including all the accounts of Gaylord Container Corporation (including
its subsidiaries, the Company), and are in conformity with Securities
and Exchange Commission Rule 10-01 of Regulation S-X.  The financial
statements should be read in conjunction with the audited consolidated
financial statements and the notes thereto on Form 10-K for the fiscal
year ended September 30, 1997.  Certain amounts in the consolidated
statement of cash flows have been reclassified to conform to the
current year presentation.

2.  INVENTORIES
    -----------
<TABLE>
<CAPTION>
                                           DECEMBER 31,     SEPTEMBER 30,
                                               1997             1997
                                           ------------     -------------     
                                                   (In millions)         
<S>                                       <C>              <C>
Inventories consist of:

Finished products                               $  20.5           $  22.5
In process                                         48.8              39.3
Raw materials                                      12.2               9.2
Supplies                                           14.6              15.0
                                                 ------            ------
                                                   96.1              86.0
LIFO valuation adjustment                          (7.9)             (8.6)
                                                 ------            ------ 
  Total                                         $  88.2           $  77.4
                                                 ======            ======
</TABLE>

3.  CONTINGENCIES
    -------------

The Company is not a party to any legal proceedings other than
litigation incidental to normal business activities, except as
described below:

The Company and certain of its officers and directors have been named
in a civil suit filed in Cook County (Illinois) Circuit Court alleging
that they omitted or misrepresented facts about the Company's
operations in connection with the Company's initial public offering of
stock in 1988 and in certain periodic reports.  The complaint, a
purported class action, originally sought unspecified damages under
the Illinois Consumer Fraud and Deceptive Practices Act and for common
law fraud.  On January 10, 1996, the court dismissed both counts with
prejudice, and the plaintiff appealed.  On September 29, 1997, the
Illinois Court of Appeals affirmed, in all respects, dismissal of the
complaint.  Plaintiff's appeal of that decision to the Illinois
Supreme Court is pending.  A similar lawsuit, based on the same
factual allegations, but alleging violations of Federal securities
laws and filed in the United States District Court for the Northern
District of Illinois, was voluntarily dismissed by the same plaintiff
in July 1993.  The Company believes that after investigation of the
facts the allegations in the complaint are without merit, and the
Company is vigorously defending the decision on appeal.


                                         4
<PAGE>
On October 18 and December 4, 1995, the Company, its directors and
certain of its officers were named in complaints which have been
consolidated in the Court of Chancery of the state of Delaware
alleging breach of fiduciary duties on two counts.  The first count is
a putative class action and the second is an alleged derivative claim
brought on behalf of the Company against the individual defendants. 
Both counts allege that the Company's stockholder Rights Agreement (as
defined), adopted on June 12, 1995, amendments to the Company's
charter and by-laws, adopted on July 21, 1995, and a redemption of 
warrants in June 1995 all were designed to entrench the individual
defendants in their capacities as directors and officers at the
expense of stockholders who otherwise would have been able to take
advantage of a sale of the Company. The complaint asks the court,
among other things, to rescind the amendments and prohibit the use of
the stockholder Rights Agreement to discourage any bona fide acquirer. 
In the alternative, the plaintiffs seek compensatory damages.  On
December 19, 1996, the Delaware Chancery Court denied the Company's
motion to dismiss the complaint in its entirety.  The case is now in
the discovery stage.  The Company believes that, after investigation
of the facts, the allegations are without merit and is defending
itself vigorously. 

On October 23, 1995, a rail tank car exploded on the premises of the
Bogalusa, Louisiana plant of Gaylord Chemical Corporation, a wholly
owned, independently operated subsidiary of the Company.  The accident
resulted in the venting of certain chemicals, including by-products of
nitrogen tetroxide, a raw material used by the plant to produce
dimethyl sulfoxide, a solvent used in the manufacture of
pharmaceutical and agricultural chemicals.  More than 160 lawsuits
have been filed in both federal and state courts naming as defendants
Gaylord Chemical Corporation and/or the Company, certain of their
respective officers and other unrelated corporations and individuals. 
The lawsuits, which seek unspecified damages, allege personal injury,
property damage, economic loss, related injuries and fear of injuries
as a result of the accident.  On April 1, 1996, the federal judge
dismissed all but one of the federal actions for failing to state
claims under federal law and remanded the remaining tort cases to the
district court in Washington Parish, Louisiana, where they have been
consolidated.  Discovery in the remaining federal action, a suit to
recover alleged clean-up costs, was ordered coordinated with the
Louisiana state action.  

On May 21, 1996, the Louisiana state court established a Plaintiff's
Liaison Committee (PLC) to coordinate and oversee the consolidated
cases on behalf of plaintiffs.  On June 26, 1996 the PLC and
defendants agreed to a Case Management Order (CMO) that was
subsequently entered by the Court.  Pursuant to the CMO, the
plaintiffs filed a single Consolidated Master Petition against Gaylord
Chemical Corporation, the Company and twenty-one other defendants.  In
the Consolidated Master Petition all claims against individual
defendants (including the officers of Gaylord Chemical Corporation and
the Company) were dropped.  The Consolidated Master Petition includes
substantially all of the claims and theories asserted in the prior
lawsuits, including negligence and strict liability, as well as
several claims of statutory liability.  Compensatory and punitive

                                         5
<PAGE>
damages are sought.  The Company and its subsidiaries are vigorously
contesting all of these claims.

On July 15, 1996 the Louisiana state court certified these
consolidated actions as a single class action.  The class was
tentatively defined to include all those persons or entities who claim
to have been injured as a result of the October 23, 1995 accident.  On
March 27, 1997, the Louisiana Court of Appeal for the First Circuit
reversed the trial court's order granting class certification,
defining the class, approving class notice, requiring all notice forms
be notarized and appointing the plaintiffs' attorneys to the PLC.  The
Court of Appeal ordered the trial court to conduct a new class
certification hearing to allow additional evidence on the adequacy of
class representatives and class counsel and instructed the trial court
to create a concise geographic definition of the class of individuals
allegedly impacted.  Finally, the Court of Appeal instructed the trial
judge to approve a new class notice form that permits the use of
notice of claim forms and/or proof of claim forms only after a
determination of liability, if any.  The Louisiana Supreme Court
declined to review that decision.  On May 23, 1997, the trial court
reappointed the PLC with several new members.  On June 20, 1997, a
second CMO was entered by the court.  Pursuant to this second CMO, a
Second Consolidated Amended Master Petition (SCAMP) was filed on June,
20 1997.  The SCAMP includes substantially all the claims and theories
asserted in the original Consolidated Master Petition.  No officers of
Gaylord Chemical Corporation or the Company are named as defendants in
the SCAMP.
  
Pursuant to the second CMO, the status of all lawsuits pending before
the filing of the SCAMP, some of which name officers of Gaylord
Chemical Corporation or the Company as defendants, will be determined
by the trial court after class certification.  The trial court
certified a class on November 10, 1997.  The class consists of
allegedly injured parties in the city of Bogalusa, parts of Washington
Parish, Louisiana, and parts of Marion, Walthall and Pike Counties in
Mississippi.  Defendants have filed supervisory writs with the Court
of Appeal challenging the trial court's class certification ruling. 
Those writs are currently pending.

In addition, the Company, Gaylord Chemical Corporation and numerous
other third party companies have been named as defendants in twelve
actions brought by plaintiffs in Mississippi state court, who claim
injury as a result of the October 23, 1995 accident at the Bogalusa
facility.  These cases, which purported to be on behalf of over 11,000
individuals, were not filed as a class action but rather have all been
consolidated before a single judge in Hinds County, Mississippi.  All
of these cases allege claims similar to those  in Louisiana State
Court.  To date, discovery in the consolidated cases has been
coordinated with the ongoing discovery in the Louisiana class action. 
Following several rulings by the Mississippi Trial Court judge, over
7,400 individuals' claims in these consolidated actions have been
either: (1) dismissed for failure to comply with outstanding discovery
orders or (2) voluntarily withdrawn.  As with the Louisiana class
action, the Company and Gaylord Chemical Corporation are vigorously
contesting all claims in Mississippi arising out of the October 23,

                                         6
<PAGE>
1995 explosion.  In addition, the Company and Gaylord Chemical
Corporation have filed cross-claims for indemnity and contribution
against co-defendants in both of the Mississippi and Louisiana
actions.

The Company and Gaylord Chemical Corporation maintain insurance and
have filed separate suits seeking a declaratory judgement of coverage
for the October 23, 1995 accident against their general liability and
directors and officers liability insurance carriers.  These cases are
currently pending in Louisiana state court before the same judge who
is hearing the liability class action.  The carrier with the first
layer of coverage under the general liability policy has agreed to pay
the Company's and Gaylord Chemical Corporation's defense costs under a
reservation of rights.  The primary carrier and the nine excess level
insurers moved for summary judgment before the trial court claiming
that coverage for the accident is excluded because of pollution
exclusions contained in these policies.  On November 20, 1997, the
trial court denied all of the motions, and the insurers have filed
supervisory writs with the Court of Appeal contesting that ruling. 
Those writs are pending. 

The Company believes the outcome of such litigation will not have a
material adverse effect on the Company's financial position, results
of operations or cash flows.    

4. ADOPTION OF NEW ACCOUNTING STANDARD
   -----------------------------------

Effective October 1, 1997, the Company has adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (FAS No.
128).  FAS No. 128 requires the presentation of both basic earnings
per share and diluted earnings  per share.  Diluted earnings per share
will not be presented in periods where the effect is antidilutive
(that is, results in increased earnings per share or decreased net
loss per share).   





                                         


                                         7
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
---------------------

First Quarter of Fiscal 1998 Compared with First Quarter of Fiscal
1997

Net sales for the first quarter of fiscal 1998 were $197.6 million
compared with net sales of $195.6 million for the first quarter of
fiscal 1997.  The operating loss for the current quarter was $9.1
million compared with operating earnings of $0.9 million for the
year-ago quarter.  The net loss for the current quarter totaled $18.8
million, or $0.35 per common share, compared with a net loss of $9.7
million, or $0.18 per common share, for the year-ago quarter.

Sales in the first quarter of fiscal 1998 were favorably affected by
higher unbleached kraft paper production which increased net sales by
approximately $2 million.  Quarter-over-quarter, total mill production
increased to 4,076 tons per day (TPD, calculated on the basis of the
number of days in the period) from 3,997 TPD.  Unbleached kraft paper
production in the current quarter increased approximately 17 percent
to 796 TPD from 681 TPD in the prior-year quarter. Containerboard
production in the first quarter of fiscal 1998 was 3,280 TPD compared
with production of 3,316 TPD in the prior-year quarter.          

Corrugated shipments totaled approximately 3.3 billion square feet in
both the first quarter of fiscal 1998 and fiscal 1997.  Multiwall bag
shipments increased to 14.9 thousand tons in the current quarter
compared with shipments of 14.1 thousand tons in the first quarter of
fiscal 1997.    

Average selling prices for the Company's corrugated products decreased
approximately 2 percent in the current quarter compared with the
prior-year quarter.  Average selling prices for the Company's domestic
linerboard increased approximately 18 percent in the first quarter of
fiscal 1998 compared with the prior-year quarter while average selling
prices for export linerboard were essentially unchanged.  Average
selling prices for the Company's unbleached kraft paper increased
approximately 9 percent in the current quarter compared with the
prior-year quarter while average selling prices for multiwall bags
increased less than one percent.    

Gross margin for the first quarter of fiscal 1998 decreased to $11.5
million from $21.4 million in the prior-year quarter primarily due to
higher fiber costs ($9 million).  The increase in fiber costs is
primarily due to higher prices for both wood chips and old corrugated
containers (OCC).  The average delivered cost of wood chips and OCC
increased approximately 24 percent and 18 percent, respectively, in
the first quarter of fiscal 1998 compared to the first quarter of
fiscal 1997.           

Selling and administrative costs were $20.6 million for the current
quarter compared with selling and administrative costs of $20.5
million in the prior-year quarter.

Net interest expense of $21.1 million in the first quarter of fiscal
1998 increased from the prior-year quarter by $1.7 million primarily

                                        8
<PAGE>
as a result of higher average debt levels.

In the first quarter of fiscal 1998, the Company recorded a tax
benefit of $11.6 million which corresponds to an effective tax rate of
approximately 38 percent.  In the first quarter of fiscal 1997, the
Company recorded a tax benefit of $8.0 million which corresponds to an
effective rate of approximately 45 percent.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

General

The Company has historically financed its operations through cash
provided by operations, borrowings under its credit agreements and the
issuance of debt and equity securities.  The Company's principal uses
of cash are to pay operating expenses, fund capital expenditures and
service debt.

Net cash used for operations for the first quarter of fiscal 1998 was
$54.0 million, compared with net cash used for operations of $38.2
million for the year-ago period.  The unfavorable comparison to the
prior-year period was primarily due to reduced operating earnings and
increased working capital.

Capital expenditures of $14.6 million in the first quarter of fiscal
1998 increased by $6.2 million from $8.4 million in the first quarter
of fiscal 1997. 

In fiscal 1992, the Company determined it would be unlikely that its
Antioch, California virgin fiber mill (the East Mill), which was
closed in fiscal 1991, could be sold as a mill site or that the East
Mill, or some portion thereof, could be operated economically by the
Company.  The Company believed, and continues to believe, that the
most likely outcome will be the sale of individual assets and the
subsequent demolition of the remaining structures on the mill site. 
In the first quarter of fiscal 1998 the Company incurred approximately
$0.8 million of costs for demolition and maintenance of the East Mill,
such costs are net of proceeds from scrap sales.  Demolition of the
remaining structures on the mill site will require the Company to
incur costs for asbestos removal.  The Company has deferred incurring
substantial expenditures for demolition and asbestos removal until all
uncertainties regarding disposition of the mill assets have been
resolved.  At December 31, 1997, balance sheet accruals for demolition
and asbestos removal were approximately $6.4 million, and the net book
value of the East Mill was $3.6 million.

Liquidity

At December 31, 1997, the Company had cash and equivalents of $5.6
million, a decrease of $0.5 million from September 30, 1997, as cash
used for operations and investments were largely offset by cash
provided by financing. Total debt increased by $78.5 million to $794.6
million at December 31, 1997 from $716.1 million at September 30, 1997
primarily as a result of increased revolver borrowings.  The increase
in revolver borrowings was primarily due to semi-annual interest
payments on the Company's public debt securities ($37 million),
capital expenditures ($15 million) and seasonal increases in primary
working capital ($17 million).  At December 31, 1997, the Company had

                                         9
<PAGE>
$118 million of borrowings outstanding and approximately $93 million
of credit available under the revolving portions of its credit
agreements.

At December 31, 1997, the Company had primary working capital of
$129.7 million compared to $112.8 million at September 30, 1997
primarily due to higher inventories and lower trade payables.  The
increased inventory is primarily the result of seasonally higher
inventory levels at the Company's mills and converting facilities. 

Strengthening industry fundamentals, including year-over-year growth
in corrugated product shipments and strong export demand for
linerboard, resulted in a $50 per ton increase in published industry
prices for containerboard in October 1997 (and subsequent increases in
converted product prices).

During the first quarter of fiscal 1998, the Company's average wood
chip prices increased approximately 24 percent compared with the first
quarter of fiscal 1997 as a result of higher demand and unusually wet
weather in the timberlands of the southern United States.  In
addition, the Company's average delivered price for OCC increased
approximately 18 percent in the first quarter of fiscal 1998 compared
with the first quarter of fiscal 1997.  OCC prices in the first
quarter of fiscal 1998, however, were more than 16 percent lower than
average prices for the fourth quarter of fiscal 1997.  The fiber
markets, however, are difficult to predict, and there can be no
assurance of the future direction of wood chip and OCC prices.

Assuming current selling prices, fiber costs and maintenance levels of
capital spending, the Company believes that cash provided by
operations, and amounts available under its credit agreements will
provide adequate liquidity to meet its debt service obligations and
other liquidity requirements over the next 12 to 24 months.  Unless
there is significant product price improvement beginning in the spring
of this year, however, the Company will be required to seek covenant
modifications to its credit agreement to maintain continued access to
its liquidity.

PENDING ACCOUNTING STANDARDS 
----------------------------
 
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" which establishes standards for reporting and
display of comprehensive income and its components in financial
statements.  The statement is effective for fiscal years beginning
after December 15, 1997.  The statement will be adopted in fiscal 1999
and will not impact the results of operations, financial position or
cash flows of the Company.

In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" which changes
the way public companies report information about segments of their
business.  The statement is effective for fiscal years beginning after
December 15, 1997.  The Company has not yet completed its analysis of
which operating segments, if any, it will report on.



                                        10
<PAGE>

OTHER
-----

The Company is conducting a review of its computer systems to identify
those areas that could be affected by the "Year 2000" issue and is
developing a plan to resolve the issue.  The Company believes that, by
modifying existing software, and/or converting to new software, the
Year 2000 issue can be resolved without significant operational
difficulties.  The financial impact of this issue is not anticipated
to be material to the Company's results of operations, financial
position or cash flows.
                                                                  
     -------------------------------------------------------------
              
     Forward-looking statements in this filing, including those
     in the footnotes to the financial statements, are made
     pursuant to the safe harbor provisions of the Private
     Securities Litigation Reform Act of 1995.  Such
     forward-looking statements are subject to risks and
     uncertainties and actual results could differ materially. 
     Such risks and uncertainties include, but are not limited
     to, general economic and business conditions, competitive
     market pricing, increases in raw material, energy and other
     manufacturing costs, fluctuations in demand for the
     Company's products, potential equipment malfunctions and
     pending litigation.  For additional information see the
     Company's annual report on Form 10-K for the most recent
     fiscal year.


                                        11
<PAGE>
                       PART II.      OTHER INFORMATION
                       -------------------------------

Item 1.  Legal Proceedings.

         The Company is not a party to any legal proceedings other
         than litigation incidental to normal business activities,
         except as described in "Note 3 of Notes to Condensed
         Consolidated Financial Statements."  The Company believes
         the outcome of such litigation will not have a material
         adverse effect on the Company's financial position, results
         of operations or cash flows.
                                                                 
Item 2.  Changes in Securities.

         Not applicable.
  
Item 3.  Defaults Upon Senior Securities.

         Not applicable. 

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

         On February 4, 1998, The Company held its annual meeting of 
         stockholders at which the following issues were voted upon       
         by holders of the Company's common stock:

The Company's nine directors were re-elected by the following vote:

                                           For          Withheld 
                                        ----------      --------
              Mary Sue Coleman          49,286,443       431,637
              Harve A. Ferrill          49,289,743       428,337
              John E. Goodenow          49,295,593       422,487
              David B. Hawkins          49,280,393       437,687
              Warren J. Hayford         49,295,268       422,812
              Charles S. Johnson        49,269,443       448,637
              Ralph L. MacDonald Jr.    49,295,343       422,737
              Marvin A. Pomerantz       49,276,718       441,362
              Thomas H. Stoner          49,296,343       421,737

An amendment to the Company's Shareholder Value Plan was approved by a
vote of 47,275,387 for; 2,355,132 against; 87,561 abstain.

The appointment of Deloitte & Touche LLP to continue to serve as the
Company's independent auditors in fiscal 1998 was ratified by a vote
of 49,499,929 for; 157,540 against; 60,611 abstain.

Item 5.  Other Information.

         Not applicable.

Item 6.  Exhibits and Reports on Form 8-K.

         Number and Description of Exhibit
         ---------------------------------

    a)   27.1(a)   Financial Data Schedule

    b)   No reports on Form 8-K were filed for the quarter ended 
         December 31, 1997
------------------------------------------------------------------------------
(a) Filed with this Quarterly Report.


                                        12
<PAGE>

                           SIGNATURES




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.


                               GAYLORD CONTAINER CORPORATION

Date: February 5, 1998         /s/ Marvin A. Pomerantz
                               ------------------------------------         
                               Marvin A. Pomerantz
                               Chairman and Chief Executive Officer


Date: February 5, 1998         /s/ Jeffrey B. Park                 
                               ------------------------------------
                               Jeffrey B. Park
                               Vice President-Controller
                               (Principal Accounting Officer)













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