UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
                                   (mark one)

              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                    For Quarterly Period Ended March 31, 2001

                                       or

              [ ] Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
               For Transition Period from __________ to __________

                          Commission File No. 000-26169

                                    XOMA Ltd.

             (Exact Name of Registrant as specified in its charter)

            Bermuda                                      52-2154066
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                     2910 Seventh Street, Berkeley, CA 94710
               (Address of principal executive offices) (Zip Code)

                                 (510) 644-1170
              (Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                    Yes X No

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common shares US$.0005 par value       66,195,223
Class                                  Outstanding at March 31, 2001



<PAGE>



                                    XOMA Ltd.

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                         Page

<S>          <C>          <C>                                                                             <C>
PART I        FINANCIAL INFORMATION

              Item 1       Consolidated Financial Statements

                           Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31,
                           2000 .............................................................................1

                           Condensed Consolidated Statements of Operations for the Three Months
                           Ended March 31, 2001 and 2000.....................................................2

                           Condensed Consolidated Statements of Cash Flows for the Three Months
                           Ended March 31, 2001 and 2000.....................................................3

                           Notes to Condensed Consolidated Financial Statements .............................4

              Item 2       Management's Discussion and Analysis of Financial Condition and Results of
                           Operations .......................................................................7

              PART II      OTHER INFORMATION

                           Items      1 through 5 are either inapplicable or
                                      nonexistent and therefore are omitted from
                                      this report

                           Item 6     Exhibits and Reports on Form 8-K .....................................10

Signatures                 .................................................................................11

</TABLE>

<PAGE>

                                    XOMA Ltd.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                    March 31,          December 31,
                                                                      2001                2000
                                                                   (Unaudited)          (Note 1)
                                                                     -------             -------
<S>                                                                  <C>                 <C>
Assets:
     Cash and cash equivalents                                       $32,169             $35,043
     Short-term investments                                              115                 172
     Related party receivable                                            237                 237
     Receivables                                                       1,587               1,008
     Prepaid expenses and other                                          141                 162
                                                                     -------             -------
         Total current assets                                         34,249              36,622
     Property and equipment, net                                       9,465               8,421
     Deposits and other                                                  169                 169
                                                                     -------             -------
                                                                     $43,883             $45,212
                                                                     =======             =======
Liabilities and Shareholders' Equity (Net Capital Deficiency):
     Accounts payable                                                $ 3,848             $ 2,515
     Accrued liabilities                                               3,501               4,311
     Capital lease obligations - current                                 247                 185
     Deferred revenue - current                                        3,733               3,333
                                                                     -------             -------
         Total current liabilities                                    11,329              10,344
     Capital lease obligations - long term                               631                 361
     Deferred revenue - long term                                      4,929               3,609
     Convertible subordinated notes                                   42,408              39,488
                                                                     -------             -------
         Total liabilities                                            59,297              53,802
Shareholders' equity (net capital deficiency)                        (15,414)             (8,590)
                                                                     -------             -------
                                                                     $43,883             $45,212
                                                                     =======             =======

</TABLE>


Note 1 - Amounts derived from the Company's Annual Report on Form 10-K as filed
with the Securities and Exchange Commission.

     See accompanying notes to condensed consolidated financial statements.




<PAGE>


                                    XOMA Ltd.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Unaudited, in thousands except per share data)

<TABLE>
<CAPTION>

                                                                       Three Months Ended
                                                                            March 31,
                                                                    -------------------------
                                                                     2001              2000
                                                                    --------          -------
Revenues:
<S>                                                                  <C>              <C>
    License fees and contract revenue                                $ 2,856          $ 2,572
                                                                     -------          -------
Operating Costs and Expenses:
    Research and development                                           8,470            7,194
    General and administrative                                         1,610            1,526
                                                                     -------          -------
                                                                      10,080            8,720
                                                                     -------          -------
Loss from operations                                                  (7,224)          (6,148)
Other Income (Expense):
    Investment and other income                                          459              490
    Interest and other expense                                          (810)            (626)
                                                                     -------          -------
Net loss                                                             $(7,575)         $(6,284)
                                                                     =======          =======
Basic and diluted net loss per share                                 $(0.11)          $(0.10)
                                                                     =======          =======
Shares used in computing basic and diluted net loss per share         66,134           61,629
                                                                     -------          -------

</TABLE>

     See accompanying notes to condensed consolidated financial statements.




<PAGE>


                                    XOMA Ltd.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Unaudited, in thousands)
<TABLE>
<CAPTION>


                                                                     Three Months Ended
                                                                          March 31,
                                                                ------------------------
                                                                  2001            2000
                                                                --------         -------
Cash Flows From Operating Activities:
<S>                                                             <C>              <C>
     Net cash provided by (used in) operating activities        $ (4,788)        $   310
                                                                 -------         -------
Cash Flows From Investing Activities:
     Proceeds from sale of short-term investments                     96              --
     Capital expenditures                                           (963)           (174)
                                                                 -------         -------
         Net cash provided by (used in) investing activities        (867)           (174)
                                                                 -------         -------
Cash Flows From Financing Activities:
     Proceeds from issuance of common shares, net                    618          32,980
     Proceeds from issuance of convertible notes                   2,203              --
     Payments on convertible notes                                    --          (1,300)
     Payments under capital leases                                   (40)             --
                                                                 -------         -------
         Net cash provided by (used in) financing activities       2,781          31,680
                                                                 -------         -------
Net increase (decrease) in cash and cash equivalents              (2,874)         31,816
Cash and cash equivalents at beginning of period                  35,043          18,539
                                                                 -------         -------
Cash and cash equivalents at end of period                       $32,169         $50,355
                                                                 =======         =======

</TABLE>

     See accompanying notes to condensed consolidated financial statements.



<PAGE>


                                    XOMA Ltd.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)


     1. Basis of Presentation

     The interim information contained in this report is unaudited but, in
management's opinion, includes all normal recurring adjustments necessary for a
fair presentation of results for the periods presented. Interim results may not
be indicative of results to be expected for the full year. The consolidated
financial statements should be read in conjunction with the Company's audited
consolidated financial statements for the year ended December 31, 2000 included
in its Annual Report on Form 10-K. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if any, at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ materially
from those estimates.

     2. Recent Accounting Pronouncement

     In June of 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). XOMA adopted SFAS 133 on January
1, 2001. Because the Company currently holds no derivative financial instruments
and does not currently engage in hedging activities, adoption of SFAS 133 had no
impact on the Company's financial position or results of operations.

     3. Accrued Liabilities

          Accrued liabilities consist of the following (in thousands):

                                         March 31,            December 31,
                                            2001                  2000
                                         ---------            ----------
        Accrued payroll costs               $1,485                $2,255
        Accrued clinical trial costs         1,185                 1,151
        Other                                  831                   905
                                         ---------              --------
                                            $3,501                $4,311
                                         =========              ========


                                      -4-
<PAGE>

     4. Revenue Recognition

     Research payments under collaborative arrangements and grants are
recognized as revenue based on research expenses incurred as provided for under
the terms of the arrangements.

     The Company previously recognized non-refundable license fees as revenue
when received and when all significant contractual obligations of the Company
relating to the fees had been met. Effective January 1, 2000, the Company
changed its method of accounting for non-refundable initial fees to recognize
such fees over the period of continuing involvement by the Company such as the
research and development period or the manufacturing period of the agreement, as
applicable. The Company believes this accounting policy is appropriate based on
guidance provided in SEC Staff Accounting Bulletin No. 101 - Revenue Recognition
in Financial Statements (SAB 101). As of January 1, 2000, there was no
cumulative effect of an accounting change as a result of the adoption of SAB 101
and there was no pro forma effect of the adoption of SAB 101 in any year
presented. In connection with the license and supply and development agreements
with Baxter Healthcare Corporation ("Baxter") on January 25, 2000, the Company
received $10.0 million as an initial, non-refundable fee. This initial fee was
deferred and is being amortized over the period of continuing involvement, which
period is estimated to be 36 months.

     In January of 2001, the Company entered into a strategic process
development and manufacturing agreement with Onyx Pharmaceuticals, Inc. ("Onyx")
which calls for the Company to scale-up production to commercial volume and
manufacture Onyx's CI-1042 product. The initial term of the agreement is five
years, with options to extend for additional periods. Terms of the agreement
include an initial payment of $2.0 million, payments for development work and
material produced, and payments upon achieving key milestones. XOMA's objectives
are to increase the fermentation volume to commercial scale, to improve the
purification process, to seek FDA licensure of its manufacturing facility for
CI-1042, and to produce material for use in clinical testing and for commercial
sale upon approval. The initial payment was deferred and is being amortized over
five years.

     Milestone payments under collaborative arrangements are recognized as
revenue upon achievement of the incentive milestone events, which represent the
culmination of the earnings process because the Company has no future
performance obligations related to the milestone payment. Milestone payments are
triggered either by the results of our research efforts or by events external to
the Company, such as regulatory approval to market a product. Amounts received
in advance are recorded as deferred revenue until the related revenue is
recognized.


                                      -5-
<PAGE>

     5. Comprehensive Loss

     Available-for-sale securities are stated at fair value, with unrealized
gains and losses, net of tax, if any, reported in other comprehensive income
(loss). Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in interest
and other expense and totaled $60,000 in the quarter ended March 31, 2001. The
cost of investments sold is based on the specific identification method.
Interest and dividends on securities classified as available-for-sale are also
included in investment and other income.

     Comprehensive loss includes certain changes in equity that are excluded
from net loss. Specifically, unrealized holding gains and losses in available
for sale investments, which were reported separately in shareholders' equity,
are included in accumulated other comprehensive income (loss). Comprehensive
loss and its components for the quarters ended March 31, 2001 and 2000 are as
follows (in thousands):

<TABLE>
<CAPTION>

                                                                                Three Months Ended
                                                                                    March 31,
                                                                              ------------------------
                                                                                 2001            2000
                                                                              --------        --------
       <S>                                                                    <C>             <C>
        Net Loss                                                              $(7,575)        $(6,284)
        Unrealized gain on securities available-for-sale                           --             887
                                                                              --------        ---------
        Comprehensive loss                                                    $(7,575)        $(5,397)
                                                                              =========       =========
</TABLE>

     6. Net Loss Per Common Share

     Basic and diluted net loss per common share is based on the weighted
average number of common shares outstanding during the period in accordance with
Financial Accounting Standard No. 128. Common share equivalents were not
included because they are antidilutive.



                                      -6-
<PAGE>



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


Results of Operations:

     Revenues in the first quarter of 2001 increased to $2.9 million, from $2.6
million in the first quarter of 2000. Licensing revenue, primarily reflecting
the amortization into revenue of certain license fees and other payments
received from Baxter Healthcare Corporation and Onyx Pharmaceuticals, Inc.,
increased to $1.0 million in the first three months of 2001, compared to $0.6
million in the comparable prior year period. Contract revenue decreased to $1.8
million in the 2001 period from $2.0 million in the first quarter of 2000.

     Operating expenses increased to $10.1 million in the first quarter of 2001
from $8.7 million in the first quarter of 2000. Research and development
expenses increased to $8.5 million from $7.2 million in the prior year period,
reflecting increased development costs associated with ING-1, GENIMUNE(TM),
BPI-derived peptide products and Onyx's CI-1042 product. This was partially
offset by reduced spending on NEUPREX(R). General and administrative expenses
increased from $1.5 million in the first quarter of 2000 compared with $1.6
million in 2001.

     Interest expense was higher in the first three months of 2001 compared to
2000 due to higher interest rates and the higher average note balance of the
convertible subordinated notes due Genentech, Inc.

Liquidity and Capital Resources:

     XOMA ended the quarter with $32.3 million in cash, cash equivalents and
short-term investments, compared with $35.2 million at December 31, 2000. Net
cash used in operations in the first quarter of 2001 was $4.8 million, compared
with net cash provided by operations of $0.3 million in the first quarter of
2000. The first quarter 2000 included payments of $10.0 million from Baxter
related to the licensing of NEUPREX(R). This payment is being recognized as
revenue over 36 months. See footnote 4, "Revenue Recognition," to the
Consolidated Financial Statements.

     Capital expenditures increased from $0.2 million in the first quarter of
2000 to $1.0 million in the current year quarter. Current year spending included
expenses related to the transfer of XOMA's technical development operations from
Santa Monica to Berkeley, as well as investments related to our collaborative
arrangement with Onyx.


                                      -7-
<PAGE>

     For the full year 2001, the Company currently expects its loss to be
somewhat lower than in 2000, with increased expense levels being more than
offset by higher revenues.

     The Company has been able to control its operating cash consumption by
carefully monitoring its costs. As a result, based on current spending levels
and taking into account the Onyx transaction, the Company believes its cash
position and resulting investment income are sufficient to finance the Company's
currently anticipated levels of spending through approximately the end of 2002.
Strategic arrangements with Onyx, Baxter and Genentech have reduced Company
spending levels by paying certain product development costs. The Company
continues to evaluate a variety of arrangements that would further strengthen
its competitive position and provide additional funding, but cannot predict
whether or when any such arrangement or additional funding will be consummated
or whether additional funding will be available. Without additional funding, the
Company will have to decrease or eliminate the development of some of its
products.

Quantitative and Qualitative Disclosures About Market Risk:

     Interest Rate Risk. The Company's exposure to market rate risk due to
changes in interest rates relates primarily to the Company's investment
portfolio. The Company does not use derivative financial instruments in its
investment portfolio. By policy, the Company places its investments with high
quality debt security issuers, limits the amount of credit exposure to any one
issuer, limits duration by restricting the term and holds investments to
maturity except under rare circumstances. The Company classifies its cash
equivalents as fixed rate if the rate of return on an instrument remains fixed
over its term. As of March 31, 2001, all the Company's cash equivalents are
classified as fixed rate.

     The Company also has a long-term convertible note due to Genentech in 2005.
Interest on this note of LIBOR plus 1% is reset at the end of June and December
each year and is therefore variable.

     The table below presents the amounts and related weighted interest rates of
the Company's cash equivalents and long-term convertible note at March 31, 2001:

<TABLE>
<CAPTION>

                                                               Fair Value            Average
                                            Maturity        ($ in millions)       Interest Rate
                                            --------        ---------------      --------------
<S>                                           <C>                <C>                   <C>
Cash equivalents, fixed rate                  daily              $ 32.2                5.5%
Long-term convertible note, variable rate      2005                42.4                7.1%
</TABLE>


     Other Market Risk. At March 31, 2000 the Company had a long-term
convertible note outstanding which is convertible into common shares based on
the market price


                                      -8-
<PAGE>

of the Company's common shares at the time of conversion. A 10% decrease in the
market price of the Company's common shares would increase the number of shares
issuable upon conversion of either security by approximately 11%. An increase in
the market price of Company common shares of 10% would decrease the shares
issuable by approximately 9%.

Forward Looking Statements:

     Statements made herein related to the estimated size of the Company's loss
for 2001, the estimated levels of its expenses and revenues for the balance of
2001, the sufficiency of its cash resources, present or future collaborative
arrangements and current plans for product development, or that otherwise relate
to future periods, are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These statements are based on assumptions that may not prove accurate.
Actual results could differ materially from those anticipated due to certain
risks inherent in the biotechnology industry and for companies engaged in the
development of new products in a regulated market. These risks, including those
related to size and timing of expenditures, unanticipated expenditures,
availability of funds, changes in the status of the existing collaborative
relationships, availability of additional collaboration opportunities, the time
or results of pending and future clinical trials, the ability of collaborators
and other partners to meet their obligations, market demand for products,
actions by the Food and Drug Administration of the U.S. Patent and Trademark
Office, and uncertainties regarding the status of biotechnology patents, are
discussed in the Company's most recent annual report on Form 10-K and in other
SEC filings.



                      Condensed Financial Statements Follow



                                      -9-
<PAGE>



                           PART II - OTHER INFORMATION


     Item 1 Legal Proceedings. None.

     Item 2 Changes in Securities. None.

     Item 3 Defaults Upon Senior Securities. None.

     Item 4 Submission of Matters to a Vote of Security Holders. None

     Item 5 Other Information. None. Item 6 Exhibits and Reports on Form 8-K.

     Current Report on Form 8-K dated and filed on January 30, 2001, as amended
          by Amendment No. 1 on Form 8-K/A dated and filed on February 13, 2001
          (File No. 000-26169), Item 5 (Other Events) and 7 (Exhibits).




                                      -10-
<PAGE>



                                    XOMA Ltd.

                                   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.

                            XOMA LTD.


Date:    May 4, 2001        By:    /s/ JOHN L. CASTELLO
                                   ---------------------------------------------
                                   John L. Castello
                                   Chairman of the Board, President and
                                   Chief Executive Officer


Date:    May 4, 2001        By:    /s/ PETER B. DAVIS
                                   ---------------------------------------------
                                   Peter B. Davis
                                   Vice President, Finance and
                                   Chief Financial Officer

                                      -11-
<PAGE>