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

                              FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended    March 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           


              Commission file number          0-11210        


                        Krupp Realty Fund, Ltd.-III
           Massachusetts                          04-2763323      

(State or other jurisdiction of           (IRS employer
incorporation or organization)       identification no.)

470 Atlantic Avenue, Boston, Massachusetts            02210          
(Address of principal executive offices)       (Zip Code)


                              (617) 423-2233                                
 
           (Registrant's telephone number, including area code)



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  


The total number of pages in this document is 10.
<PAGE>

                      PART I.  FINANCIAL INFORMATION

Item 1.  CONSOLIDATED FINANCIAL STATEMENTS

This form 10-Q contains 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.  Actual results could differ materially from those
projected in the forward-looking statements as a result of a number of
factors, including those identified herein.

               KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                           

                                  ASSETS
                                                March 31,     December 31,
                                                 1997          1996   
    

 <S>                                           <C>         <C>
Multi-family apartment complexes,
 less accumulated depreciation of
 $18,742,370 and $18,281,640, respectively      $11,161,896 $11,505,230 
Cash and cash equivalents                           478,659     468,735
Replacement reserve escrow                          126,468     110,994 
Cash restricted for tenant security deposits        185,338     183,758
Prepaid expenses and other assets                   570,290     603,090
Deferred expenses, net of accumulated 
 amortization of $178,554 and $167,081,
 respectively                                       341,030     352,503

      Total assets                              $12,863,681 $13,224,310


                     LIABILITIES AND PARTNERS' DEFICIT

Liabilities:
 Mortgage notes payable                         $19,403,524 $19,491,853
 Accounts payable                                     4,297      22,397
 Due to affiliates (Note 3)                          24,517          -
 Accrued expenses and other liabilities             652,485     724,481

      Total liabilities                          20,084,823  20,238,731

Partners' deficit (Note 2):
 Investor Limited Partners
  (25,000 Units outstanding)                     (5,998,188) (5,801,804)
 Original Limited Partner                          (896,795)   (888,525)
 General Partners                                  (326,159)   (324,092)

      Total Partners' deficit                    (7,221,142) (7,014,421)

      Total liabilities and Partners' deficit   $12,863,681 $13,224,310 
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>


KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
           
<TABLE>
<CAPTION>
                                                 For the Three Months 
                                                     Ended March 31,     
                                                  1997           1996   

<S>                                            <C>            <C>
Revenue:
  Rental                                       $1,768,195     $1,623,884
  Other income                                      9,816         16,076

     Total revenue                              1,778,011      1,639,960

Expenses:
  Operating (Note 3)                              511,118        479,505
  Maintenance                                      90,052         75,123
  Real estate taxes                               134,841        125,925
  Management fees (Note 3)                         85,398         79,682
  General and administrative (Note 3)              53,767         26,057
  Depreciation and amortization                   472,203        442,780
  Interest                                        428,668        436,302

     Total expenses                             1,776,047      1,665,374

Net income (loss)                              $    1,964     $  (25,414)

Allocation of net income (loss) (Note 2):

Investor Limited Partner
  Interest (25,000 Units outstanding)          $    1,866     $  (24,143)

Per Unit of Investor Limited Partner
  Interest                                     $      .07     $     (.97)

Original Limited Partner                       $       78     $   (1,017)

General Partners                               $       20     $     (254)
            
</TABLE>

                  The accompanying notes are an integral
              part of the consolidated financial statements.
<PAGE>
                KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                __________
<TABLE>
<CAPTION>
                                               For the Three Months 
                                                 Ended March 31,      
                                               1997          1996   

<S>                                         <C>           <C>
Operating activities:
  Net income (loss)                         $   1,964     $ (25,414)
  Adjustments to reconcile net income
    (loss) to net cash provided by
    operating activities:
     Depreciation and amortization            472,203       442,780
     Changes in assets and liabilities:
        Decrease (increase) in cash
         restricted for tenant security
         deposits                              (1,580)       33,677
        Decrease in prepaid expenses and 
         other assets                          32,800        54,714 
        Decrease in accounts payable           (9,100)      (20,167)
        Increase in due to affiliates          24,517           -
        Decrease in accrued expenses and 
         other liabilities                    (71,996)      (26,948)

           Net cash provided by operating 
             activities                       448,808       458,642

Investing activities:
     Decrease in accounts payable for  
      fixed asset additions                    (9,000)         -    
     Additions to fixed assets               (117,396)      (33,749)
     Funding to replacement reserve escrow    (15,474)      (15,259)
     Increase in other investments               -         (294,435)
Net cash
used in investing 
             activities                      (141,870)     (343,443)

Financing activities:
     Distributions                           (208,685)     (208,685)
     Principal payments on mortgage 
      notes payable                           (88,329)      (80,771)
Net cash
used in financing
             activities                      (297,014)     (289,456)

Net increase (decrease) in cash and cash        
 equivalents                                    9,924      (174,257)

Cash and cash equivalents, beginning
 of period                                    468,735       654,696

Cash and cash equivalents, end of period    $ 478,659     $ 480,439
</TABLE>
                                                                   
The accompanying notes are an integral
             part of the consolidated financial statements.
<PAGE>
               KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                          

(1)           Accounting Policies

   Certain information and footnote disclosures normally included in
   financial statements prepared in accordance with generally accepted
   accounting principles have been condensed or omitted in this report on
   Form 10-Q pursuant to the Rules and Regulations of the Securities and
   Exchange Commission.  In the opinion of the General Partners of Krupp
   Realty Fund, Ltd.-III and Subsidiary (the "Partnership"), the
   disclosures contained in this report are adequate to make the
   information presented not misleading.  See Notes to Consolidated
   Financial Statements included in the Partnership's Annual Report on Form
   10-K for the year ended December 31, 1996 for additional information
   relevant to significant accounting policies followed by the Partnership.
   In the opinion of the General Partners of the Partnership, the
   accompanying unaudited consolidated financial statements reflect all
   adjustments (consisting of only normal recurring accruals) necessary to
   present fairly the Partnership's consolidated financial position as of
   March 31, 1997 and its results of operations and its cash flows for the
   three months ended March 31, 1997 and 1996.  Certain prior period
   balances have been reclassified to conform with current period financial
   statement preparation.

   The results of operations for the three months ended March 31, 1997 are
   not necessarily indicative of the results which may be expected for the
   full year.  See Management's Discussion and Analysis of Financial
   Condition and Results of Operations included in this report.  
   
(2)           Summary of Changes in Partners' Deficit

   A summary of changes in Partners' deficit for the three months ended
March         31, 1997 is as follows:
<TABLE>
<CAPTION>

                           Investor    Original                 Total
                           Limited     Limited     General     Partners'
                           Partners    Partner     Partners     Deficit  

    <S>                 <C>          <C>         <C>         <C>
     Balance at
       December 31, 1996 $(5,801,804) $(888,525)  $(324,092)  $(7,014,421)

     Net income                1,866         78          20         1,964 

     Distributions          (198,250)    (8,348)     (2,087)     (208,685)

     Balance at 
       March 31, 1997    $(5,998,188) $(896,795)  $(326,159)  $(7,221,142)
</TABLE>
(3)        Related Party Transactions

           Commencing with the date of acquisition of the Partnership's
           properties, the Partnership entered into agreements under which
           property management fees are paid to an affiliate of the
           General Partners for services as management agent.  Such
           agreements provide for management fees payable monthly at a
           rate of 5% of the gross receipts from the properties under
           management.  These management agreements were sold to BRI OP
           Limited Partnership, a publicly traded real estate investment
           trust and an affiliate of the General Partners, on February 28,
           1997.  The Partnership also reimburses affiliates of the
           General Partners for certain expenses incurred in connection
           with the operation of the Partnership and its properties
           including accounting, computer, insurance, travel, legal and
           payroll; and with the preparation and mailing of reports and
           other communications to the Limited Partners.

           Amounts accrued or paid to the General Partners or their
           affiliates were as follows:

<TABLE>
<CAPTION>
                                               For the Three Months
                                                 Ended March 31,   

                                                1997         1996  

         <S>                                  <C>          <C>
         Property management fees             $ 85,398     $ 79,682
                                              
        
         Expense reimbursements                 51,078       47,114

            Charged to operations             $136,476     $126,796   

</TABLE>
     Due to affiliates consisted of expense reimbursements of $24,517 at
     March 31, 1997.  

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

This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements including those
concerning Management's expectations regarding the future financial
performance and future events.  These forward-looking statements involve
significant risk and uncertainties, including those described herein. 
Actual results may differ materially from those anticipated by such
forward-looking statements.

Liquidity and Capital Resources

The Partnership's ability to generate cash adequate to meet its needs is
dependent primarily upon the operations of its real estate investments. 
Such ability is also dependent upon the future availability of bank
borrowings and the potential refinancing and sale of the Partnership's
remaining real estate investments.  These sources of liquidity will be
used by the Partnership for payment of expenses related to real estate
operations, capital expenditures, debt service and expenses.  Cash Flow,
if any, as calculated under Section 8.2(a) of the Partnership Agreement,
will then be available for distribution to the Partners.

The Partnership is planning to spend approximately $1,043,000 for capital
improvements at its properties in 1997.  In order to fund the
improvements the Partnership will use its existing cash reserves,
reserves for replacement and cash flow from operations.  The Partnership
believes that the improvements are necessary to compete with current
market conditions, produce quality rental units and absorb excess demand
at the properties' respective locations and to both maintain and increase
its current occupancy levels.  Renovations include the replacement of
countertops, carpeting, appliances, asphalt repairs, and both interior
and exterior building improvements.

Cash Flow

Shown below, as required by the Partnership Agreement, is the calculation
of Cash Flow of the Partnership for the three months ended March 31,
1997.  The General Partners provide the information below to meet
requirements of the Partnership Agreement and because they believe that
it is an appropriate supplemental measure of operating performance. 
However, Cash Flow should not be considered by the reader as a substitute
to net income (loss), as an indicator of the Partnership's operating
performance or to cash flows as a measure of liquidity. 

                                                     Rounded to $1,000

   Net income for tax purposes                             $  66,000    

   Items not requiring or (requiring) the use
    of operating funds:
     Tax basis depreciation and amortization                 408,000 
     Principal payments on mortgage notes payable            (88,000)
     Expenditures for capital improvements                  (117,000)  
     Additions to working capital reserves                   (60,000)

   Cash Flow                                               $ 209,000


Operations

Cash Flow, as calculated by Section 8.2(a) of the Partnership Agreement,
before additions to working capital reserves, decreased during the three
months ended March 31, 1997, as compared to the three months ended March
31, 1996, primarily due to an increase in capital improvement
expenditures. 

Total revenue for the first quarter of 1997, as compared to the first
quarter of 1996, increased due to increases in rental rates and average
occupancy rates at all the Partnership's properties.  Occupancy rates for
the first quarter of 1997 and 1996 for Brookeville, Hannibal Grove
("Hannibal"), and Dorsey's Forge ("Dorsey's") Apartments averaged 98%,
99%, and 98%, and 95%, 93%, and 93%, respectively.  Interest income,
during the same time period, decreased as a result of lower cash and cash
equivalents available for investment.  

During the three months ended March 31, 1997, as compared to the three
months ended March 31, 1996, total expenses increased, with higher
operating expenses, real estate taxes, maintenance, general and
administrative and depreciation expenses.  Operating expense increased
due to an increase in advertising and leasing expenses which resulted in
the higher occupancy rates discussed above.  Real estate taxes increased
due to higher property assessments at Brookeville and Hannibal and also
because of a real estate tax refund received in 1996 for Dorsey's. 
Maintenance expense increased as landscaping, parking lot repairs, and
interior building repairs were completed at the Partnership's properties. 
General and administrative expense increased as a result of legal costs
related to the recent unsolicited tender offer made to purchase
Partnership Units.  Depreciation expense increased in conjunction with
capital improvement expenditures.  

<PAGE>


KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY

                       PART II - OTHER INFORMATION
                                          


Item 1.    Legal Proceedings
              Response:  None

Item 2.    Changes in Securities
              Response:  None

Item 3.    Defaults upon Senior Securities
              Response:  None

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

Item 5.    Other Information
              Response:  None

Item 6.    Exhibits and Reports on Form 8-K
              Response:  None


<PAGE>

                                SIGNATURE

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


                         Krupp Realty Fund, Ltd. - III
                                 (Registrant)

                         BY:  /s/Wayne H. Zarozny                       
                              Wayne H. Zarozny
                              Treasurer and Chief Accounting Officer
                              of The Krupp Corporation, a General Partner


DATE:  May 13, 1997