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  the  quarterly  period  ended  June  30,  2001

                                       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:   0-27432
                               ------------


                         CLEAN DIESEL TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                                       06-1393453
       -------------                                 ------------------
  (State of Incorporation)                  (I.R.S. Employer Identification No.)

Clean Diesel Technologies, Inc.
300 Atlantic Street - Suite 702
Stamford, CT                                           06901-3522
(Address of principal executive offices)               (Zip Code)

                                 (203) 327-7050
              (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 and (2) has been subject to such filing requirements for
the  past  90  days.


                            Yes X    No
                               ---     ---

As  of  August 7, 2001, there were outstanding 2,698,787 shares of Common Stock,
par  value  $0.05  per  share,  of  the  registrant.


================================================================================


<PAGE>
                        CLEAN DIESEL TECHNOLOGIES, INC.

                  Form 10-Q for the Quarter Ended June 30, 2001

                                      INDEX


                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION

Item 1.    Financial Statements (Unaudited)

           Balance Sheets as of June 30, 2001,                                 3
           and December 31, 2000

           Statements of Operations for the Three and Six                      4
           Months Ended June 30, 2001 and 2000

           Statements of Cash Flows for the Three and Six                      5
           Months Ended June 30, 2001 and 2000

           Note to Financial Statements                                        6

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


PART II.  OTHER INFORMATION

Item 1.    Legal Proceedings                                                  14
Item 2.    Changes in Securities                                              14
Item 3.    Defaults upon Senior Securities                                    14
Item 4.    Submission of Matters to a Vote of Security Holders                14
Item 5.    Other Information                                                  14
Item 6.    Exhibits and Reports on Form 8-K                                   14


SIGNATURES                                                                    15


                                      - 2 -
<PAGE>
<TABLE>
<CAPTION>
PART  I.     FINANCIAL  INFORMATION
Item  1.     Financial  Statements

                         CLEAN DIESEL TECHNOLOGIES, INC.

                                 BALANCE SHEETS

                                                           (in thousands except share data)

                                                               June 30,      December 31,
                                                                 2001            2000
                                                            --------------  --------------
                                                              (Unaudited)
<S>                                                         <C>             <C>
ASSETS
Current assets:
Cash and cash equivalents                                   $         457   $         541
Accounts receivable                                                   419              50
Inventories                                                           224             287
Other current assets                                                   68              87
                                                            --------------  --------------
Total current assets                                                1,168             965
Other assets                                                          116              92
                                                            --------------  --------------
Total assets                                                $       1,284   $       1,057
                                                            ==============  ==============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses                                 298             400
Notes payable                                               $       1,000   $         500
                                                            --------------  --------------
             Total current liabilities                              1,298             900

Deferred compensation and pension benefits                            343             308
                                                            --------------  --------------
              Total long term liabilities                           1,641           1,208

Stockholders' deficit:
Preferred stock, par value $.05 per share,
   authorized 80,000 shares, no shares issued
   and outstanding                                                     --              --
Series A Convertible Preferred Stock, par
   value $.05 per share, $500 per share
   liquidation preference, authorized 20,000
   shares, issued and outstanding 14,623 and 13,218
   respectively, involuntary liquidation value (including
   unissued dividend shares of 804 and 1,424)
   $7,713,500 and $7,321,000                                            1               1
Common Stock, par value $0.05 per share,
  authorized 15,000,000 shares, issued and
  outstanding 2,698,787 shares                                        135             133
Additional paid-in capital                                         21,360          20,849
Accumulated Deficit                                               (21,853)        (21,134)
                                                            --------------  --------------
Total Stockholders' Deficit                                          (357)           (151)
                                                            --------------  --------------
Total Liabilities and Stockholders' Deficit                 $       1,284   $       1,057
                                                            ==============  ==============
</TABLE>

See  note  to  financial  statements.


                                      - 3 -
<PAGE>
<TABLE>
<CAPTION>
                         CLEAN DIESEL TECHNOLOGIES, INC.
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                (in thousands except per share data)

                                             Three Months Ended      Six  Months  Ended
                                                  June  30,              June  30,
                                              2001        2000        2001        2000
                                           ----------  ----------  ----------  ----------
<S>                                        <C>         <C>         <C>         <C>
Revenue:
Product revenue                            $      75   $      40   $      88   $      86
License and royalty revenue                      844          19         855         279
                                           ----------  ----------  ----------  ----------
Total revenue                                    919          59         943         365

Costs and expenses:
Cost of sales                                     51          25          58          47
General and administrative                       450         489         885         918
Research and development                          91         167         176         306
Patent filing and maintenance                     53          52         100          76
                                           ----------  ----------  ----------  ----------

Gain/(loss) from operations                      274        (674        (276)       (982)
Interest income                                    3          13           6          23
Interest expense                                 (26)         --         (37)          1
                                           ----------  ----------  ----------  ----------

Net profit/(loss) before preferred stock
  dividend                                       251        (661)       (307)       (960)
Preferred stock dividend (non-cash)             (207)       (168)       (409)       (331)
                                           ----------  ----------  ----------  ----------

Net income/(loss) attributed to common
  stockholders                             $      44   $    (829)  $    (716)  $  (1,291)
                                           ==========  ==========  ==========  ==========

Basic gain/(loss) per common
   share                                   $    0.02   $   (0.32)  $   (0.27)  $   (0.49)
                                           ==========  ==========  ==========  ==========

Diluted gain/(loss) per common
   share                                   $    0.01   $     N/A   $     N/A   $     N/A
                                           ==========  ==========  ==========  ==========

Weighted average number of common shares
   outstanding - basic                         2,693       2,627       2,680       2,609
                                           ==========  ==========  ==========  ==========

Weighted average number of common shares
   outstanding - diluted                       8,235         N/A         N/A         N/A
                                           ==========  ==========  ==========  ==========
</TABLE>

See  note  to  financial  statements.


                                      - 4 -
<PAGE>
<TABLE>
<CAPTION>
                         CLEAN DIESEL TECHNOLOGIES, INC.
                            STATEMENTS OF CASH FLOWS
                                  (Unaudited)


                                                        (in  thousands)

                                                      Six  Months  Ended
                                                           June  30
                                                      2001          2000
                                                   -----------  ------------
<S>                                                <C>          <C>
OPERATING ACTIVITIES
Net Loss before preferred stock dividend           $     (307)  $      (960)
Adjustments to reconcile net loss to cash used in
   operating activities:
   Depreciation                                             5             5
   Amortization of deferred financing expense              35            --
Changes in operating assets and liabilities:
   Accounts receivable                                   (371)           13
   Inventories                                             62             9
   Other current assets                                    21            17
   Unrecognized license revenue                            --           141
   Accounts payable and accrued expenses                  (30)          (18)
                                                   -----------  ------------

Net cash used in operating activities              $     (585)  $      (793)
                                                   -----------  ------------

FINANCING ACTIVITIES
Proceeds from exercise of stock options
  Preferred stocks                                         --         1,022
  Common stocks                                             3             5
Proceeds from term loan                                   500            --
                                                   -----------  ------------

Net cash provided by financing activities                 503         1,027
                                                   -----------  ------------

INVESTING ACTIVITIES
Purchase of fixed assets                                   (2)           (3)
                                                   -----------  ------------
Net cash used in investing activities                      (2)           (3)
                                                   -----------  ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS                                          (84)          231
                                                   -----------  ------------
Cash and cash equivalents at beginning of period          541           892
                                                   -----------  ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD         $      457   $     1,123
                                                   ===========  ============

NON-CASH ACTIVITIES

  Preferred dividend                               $      409   $       331
</TABLE>

See  note  to  financial  statements.


                                      - 5 -
<PAGE>
                         CLEAN DIESEL TECHNOLOGIES, INC.

                          NOTE TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (Unaudited)

BASIS  OF  PRESENTATION

     The  accompanying  unaudited,  condensed, consolidated financial statements
have  been  prepared in accordance with generally accepted accounting principles
for  interim  financial  information  and with the instructions to Form 10-Q and
Rule  10-01  of  Regulation  S-X.  Accordingly,  they  do not include all of the
information  and  footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered  necessary  for  a  fair  presentation  have  been included. All such
adjustments  are  of  a  normal  recurring  nature.  Operating  results  for the
six-month  period  ended  June  30,  2001, are not necessarily indicative of the
results  that may be expected for the year ending December 31, 2001. For further
information, refer to the Financial Statements and footnotes thereto included in
the  Company's  Form  10-K  for  the  year  ended  December  31,  2000.

     Clean  Diesel  Technologies,  Inc.  (the "Company") was incorporated in the
State of Delaware on January 19, 1994, as a wholly owned subsidiary of Fuel-Tech
N.V.  ("Fuel  Tech").  Effective December 12, 1995, Fuel Tech completed a Rights
Offering  of  the  Company's  Common  Stock  that   reduced its ownership in the
Company to 27.6%. Fuel Tech currently holds a 21.4% interest in the Company on a
fully  converted  basis.

     The  Company  is  a specialty chemical company supplying fuel additives and
proprietary  systems  that  reduce  harmful  emissions  from internal combustion
engines  while improving fuel economy.  Prior to December 1999 the Company was a
development  stage  enterprise  devoted  to  research,  development,  and
commercialization  of  Platinum  Fuel Catalysts (PFC's) and Nitrogen Oxide (NOx)
reduction  technologies  for  diesel engines.  During December 1999, the Company
received  its  EPA registration for its platinum - cerium diesel fuel combustion
catalyst  and  recorded  its  first  commercial  sales for this Platinum Plus(R)
diesel  fuel  catalyst  product.  Accordingly,  in the opinion of management the
Company  was  no  longer  a  development  stage  enterprise.

GOING  CONCERN

     The  financial statements have been prepared assuming that the Company will
continue  as  a  going concern and do not include any adjustments to reflect the
possible  future  effects on the recoverability and classification of assets and
the  amount  and classification of liabilities that may result from the possible
inability  of  the  Company  to  continue  as  a  going  concern.

     Prior  to  2000,  the  Company  was  primarily  engaged  in  research  and
development  and  has  incurred  losses  since  inception  totaling  $19,145,000
(excluding  non-cash  preferred  stock dividends).  The Company expects to incur
losses  through  the  foreseeable  future  as  it  further  pursues  its
commercialization  efforts  and thus is unable to generate a positive cash flow.
The  Company  will require additional capital in the future in order to fund its
operations.  The Company's current cash position, including the $825,000 of ARIS
license revenue recognized in the second quarter and the $495,000 Mitsui license
revenue(see  subsequent  events),  will  fund  operations through December 2001.
Although, the Company believes that it will be successful in its capital raising
efforts, there is no guarantee that it will be able to raise such funds on terms
that will be satisfactory to the Company.  The Company has developed contingency
plans  in the event its financing efforts are not successful. Such plans include
reducing  expenses  and  selling  or  licensing  the  Company's  technologies.
Accordingly,  at  June  30, 2001, there is substantial doubt as to the Company's
ability  to  continue  as  a  going  concern.

INVENTORIES

     Inventories  are  stated  at  the  lower  of  cost or market and consist of
finished  product.  Cost  is  determined  using  the  first-in, first-out (FIFO)
method.

REVENUE  RECOGNITION

     The  Company  recognizes  revenue  from  sales  of Platinum Plus fuel borne
catalyst  and  ARIS  2000  systems  upon  shipment.


                                      - 6 -
<PAGE>
     In  February  2000,  the Company completed a license agreement with the RJM
Corporation  for  CDT's  ARIS 2000 NOx control system for all stationary, marine
and  locomotive  applications in North, Central, and South America.  The Company
received  a  $260,000  license  payment in return for transferring the ARIS 2000
technology  to the RJM Corporation.  The company also received $100,000 from the
RJM  Corporation  for the remaining ARIS 2000 inventory.  The license payment is
non-refundable  and  requires  no  ongoing  services  to  be  performed  by CDT.

     In  April  2001,  the Company amended its February 2000 ARIS Stationary NOx
Reduction  License agreement with the RJM Corporation. The previous terms of the
RJM  ARIS license agreement provided the Company the opportunity to earn up to a
total  of $1,040,000 in additional ARIS license revenue on the first, second and
third  anniversary  of  the  license  agreement  if RJM's sales exceeded certain
levels.  No  additional  license  revenue  was  earned  or  paid  on  the  first
anniversary  in  February  2001. Under the amended terms of the RJM ARIS license
agreement,  the  Company  received  $412,500  on  June  1, 2001 and will receive
another  $412,500  payment on September 1, 2001 in lieu of potentially receiving
$1,040,000  on  the second or third anniversary. The Company has recognized both
$412,500  payments  as  revenue  in  the  second  quarter  of  2001.

NOTES  PAYABLE

     In  November  2000  the  Company arranged a $1,000,000 term loan with three
private  lenders.  The  term loan has a 10% interest rate, is payable in full on
May  14,  2002 and can be drawn down in increments of $200,000. The Company drew
down  $500,000 in November 2000 and the remaining $500,000 in March of 2001. The
$1,000,000  term loan is classified as short term on the Company's balance sheet
at  June  30,  2001.

SERIES  A  PREFERRED  STOCK

     During  the  year  ended December 31, 2000 the Company received proceeds of
$1.021  million  through  private  placements  of  1,362  shares of its Series A
Preferred  Stock.  During  the  second quarter of 2001, $203,500 (407 shares) of
preferred stock dividends were declared, but unissued.   In May 2001 the company
issued  1,405  of  preferred  stock  shares  for  the  previously  declared 2000
preferred  dividends.  At June 30, 2001, the Company had 14,623 shares of Series
A  Preferred  Stock  issued  and  outstanding and an additional 804 of preferred
stock  shares  issueable for the 2001 preferred stock dividends declared.  As of
June  30,  2001  there  were  earned  but  undeclared dividends of approximately
$215,000  (430  shares).

     The  Preferred  Stock has a stated value and liquidation preference of $500
per share plus accrued and unpaid dividends.  Holders of the Preferred Stock are
entitled to receive cash dividends at the annual rate of 9% or dividends in kind
at the annual rate of 11%, when and if declared by the Board of Directors of the
Company  out of funds of the Company legally available therefore. Cash dividends
and  dividends  in  kind are each deemed "Preferred Stock Dividends".  Preferred
Stock  Dividends  are  payable  quarterly  in  arrears.

     In  order  to conserve cash, the Company's Board of Directors has adopted a
resolution that all dividends declared on the Preferred Stock be payable in kind
at the annual rate of 11%.  The dividends will be paid in the form of additional
shares  of  Preferred  Stock  in accordance with the terms and conditions of the
Certificate of Designation on the first business day of January, April, July and
October  to  stockholders  of  record  on  the  first  business day of the prior
December,  March,  June,  and  September.  Dividends  in kind are evidenced by a
stock  certificate  for  full  share  amounts  of such dividends with fractional
amounts  accruing  and  paid  in  full  shares  on  a  subsequent dividend.  The
directors  further  resolved  to issue certificates for stock dividends annually
rather  than  quarterly, unless a stockholder requests certificates to be issued
more  frequently.  These  resolutions will remain in effect until revoked by the
Company's  Board  of  Directors.


                                      - 7 -
<PAGE>
     Each  share of the Preferred Stock is convertible into 333.33 shares of the
Company's  Common Stock, which is equivalent to $1.50 per Common Share. Assuming
full conversion of the Preferred Stock, at June 30, 2001, the Company would have
approximately  7.84  million  shares  of Common Stock outstanding, of which Fuel
Tech  would  own  approximately 1.675 million shares, or a 21.4% interest in the
Company.

     The  Company can force the holder of Preferred Stock to convert its shares,
in  whole  or in part, into Common Stock at any time on, or after, the date that
the  average Closing Price (as defined in the Certificate of Designation) of the
Common  Stock  equals  or  exceeds  $4.50  for 20 consecutive trading days. Such
conversion  may,  at  the  election  of  the  holders  of  60% of the issued and
outstanding  shares  of the Preferred Stock, be scheduled to occur on a pro-rata
basis  quarterly  over  18  months.  The  Preferred Stock shall be automatically
converted  into  Common Stock should the Company consummate a public offering of
its  Common Stock in excess of certain prescribed amounts.  In the event of such
mandatory conversion, accrued and unpaid dividends will also convert into Common
Stock,  on  the  same  terms  as  the  underlying  shares  of  Preferred  Stock.

EARNINGS  PER  SHARE

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                         Three Months Ended  Six Months Ended
                                               June  30         June  30
                                            2001     2000     2001      2000
-----------------------------------------  -------  -------  -------  --------
<S>                                        <C>      <C>      <C>      <C>
Numerator:
Income profit before preferred stock
   Dividend                                   251     (661)    (307)     (960)
Preferred stock dividend (non-cash)          (207)    (168)    (409)     (331)
                                           -------  -------  -------  --------
Net income (loss) attributable to common
   Stockholder*                                44     (829)    (716)   (1,291)
Denominator:
  Denominator for basic earnings
  per share (weighted-average shares)       2,693    2,627    2,680     2,609

  Effect of dilutive securities:
  Convertible Preferred Stock               5,074        -        -         -
  Employee stock options & stock
  Purchase warrants                           468        -        -         -


  Denominator for diluted earnings
  per share (adjusted weighted-average
                                           -------  -------  -------  --------
  shares and assumed conversions)           8,235      N/A      N/A       N/A
                                           =======  =======  =======  ========

Basic earnings (loss) per share            $ 0.02   $(0.32)  $(0.27)  $ (0.49)
                                           =======  =======  =======  ========

Diluted earnings (loss) per share          $  .01   $  N/A   $  N/A   $   N/A
                                           =======  =======  =======  ========
</TABLE>

* Income and Net income available to common shareowners is the same for purposes
of  calculating  basic  and  diluted  earnings  per  share.


                                      - 8 -
<PAGE>
Employee  stock  options  and  stock  purchase warrants were not included in the
computation  of  diluted  earnings  per common share because to do so would have
been  anti-dilutive for the period.  Diluted earnings per share is not presented
for  prior  periods  because the Company reported a loss for the period or their
exercise  prices  were greater than the average market price of the common stock
and  therefore  would  be  antidilutive.

RELATED  PARTY  TRANSACTIONS

     The  Company  has a Management and Services Agreement with Fuel Tech. Under
the  agreement,  the Company pays Fuel Tech a fee equal to an additional 3 - 10%
of  the  costs  paid  on  the Company's behalf, dependent upon the nature of the
costs  incurred.  Currently,  a fee of 3% is assessed on all costs billed to the
Company from Fuel Tech.  Charges to the Company, inclusive of the administrative
fee,  were  approximately  $17,300  in both the second quarter of 2001 and 2000,
respectively.

COMMITMENTS

     Effective  October  28, 1994, Fuel Tech granted two licenses to the Company
for  all  patents  and  rights  associated  with  its PFC technology.  Effective
November  24,  1997,  the  licenses  were canceled and Fuel Tech assigned to the
Company  all  such  patents  and  rights  on  terms substantially similar to the
licenses.  In  exchange  for  the  assignment,  the Company will pay Fuel Tech a
royalty of 2.5% of its annual gross revenue from sales of the PFCs commencing in
1998.  The  royalty  obligation  expires in 2008.  The Company may terminate the
royalty  obligation  to Fuel Tech by payment of $8,727,273 in 2001 and declining
annually to approximately $1,090,910 in 2008.  The Company as assignee and owner
will  maintain  the  technology  at its own expense.  To date, no royalties have
been  paid  to  Fuel  Tech,  although  the Company has recorded an insignificant
accrual  for  royalties  payable  to  Fuel  Tech  at  June  30,  2001.


MARKETING  AND  LICENSE  AGREEMENTS

In  March  2001, the Company licensed the Lubrizol Corporation to distribute and
blend the Company's patented Platinum Plus fuel borne catalyst in Europe for use
with  particulate  filters.  The seven-year exclusive agreement includes minimum
annual  sales  performance  requirements.

In  June  2001  the  company  announced  a  non-exclusive  distribution  license
agreement  with  Baker  Petrolite,  a division of Baker Hughes.  Baker Petrolite
will  distribute CDT's patented Platinum Plus diesel fuel combustion catalyst to
refineries  and  fuel  terminals  in  the  U.S.  and  Canada.


SUBSEQUENT  EVENTS

On  July  13, 2001, the Company finalized an agreement with Mitsui & Co. Ltd. to
exclusively  license  the  Company's  patented  ARIS  NOx  reduction technology,
exclusively  in  Japan  for  stationary  applications.  To  date the Company has
received $305,000 in license payments from Mitsui related to this agreement, and
will  receive  an additional $190,000 in October 2001.  In addition, the Company
will  receive  an  ongoing  unit  royalty  on  each  system  Mitsui  sells.


                                      - 9 -
<PAGE>
                         CLEAN DIESEL TECHNOLOGIES, INC.



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


FORWARD-LOOKING  STATEMENTS

     Statements  in  this  Form  10-Q  that  are not historical facts, so-called
"forward-looking statements," are made pursuant to the safe harbor provisions of
the  Private  Securities Litigation Reform Act of 1995.  Investors are cautioned
that  all  forward-looking statements involve risks and uncertainties, including
those  detailed  in  the  Company's  filings  with  the  Securities and Exchange
Commission.  See  "Risk Factors of the Business" in Item 1, "Business," and also
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of  Operations" in the Company's Form 10-K for the year ended December 31, 2000.


RESULTS  OF  OPERATIONS

     Prior  to  2000,  the  Company  was  a development stage enterprise and its
efforts  were  devoted  to  the  research,  development and commercialization of
platinum  fuel  catalysts  and  nitrogen  oxide reduction technologies to reduce
emissions  from  diesel engines.  During December 1999, the Company received its
US  EPA registration for its platinum-cerium fuel catalyst product and completed
its  first  commercial  sales.

     Product  sales  and cost of sales were $75,000 and $51,000 respectively for
the  second  quarter  of  2001 versus $40,000 and $25,000 for 2000.  $72,000 and
$40,000 of Platinum Plus fuel catalyst sales were recorded in the second quarter
of  2001 and 2000 respectively.  Commercial sales of Platinum Plus fuel catalyst
began  in  2000  and  the  Company  is in the process of completing distribution
agreements  with  several  companies.

     Year-to-date  sales  and  cost  of  sales  were $88,000 and $58,000 in 2001
versus $86,000 and $47,000 in 2000.  Included in the 2001 revenue is $855,000 of
royalty  and  license  income  from  the  RJM  Corporation for the ARIS 2000 NOx
reduction  technology.  CDT  will  earn a royalty on all future RJM sales of the
ARIS.  CDT recognized $825,000 of license revenue from RJM for the amended April
2001  ARIS  license  agreement  between  CDT  and  RJM.

     General  and  administrative  expenses decreased $39,000 to $450,000 in the
second  quarter  2001  versus  $489,000 in the same period of 2000.  General and
administrative  expenses  have  decreased  $33,000  to $885,000 in the first six
months  of  2001 versus $918,000 in the comparable period in 2000.  The decrease
in  the  second  quarter  and  six  months  to  date is related to the timing of
marketing  programs  and  lower  professional/administrative  fees.

     Research  and  development  expenses  decreased  $76,000 to $91,000 in 2001
versus  $167,000  in  the comparable period in 2000.  For the year, research and
development  expenses  have declined $130,000 to $176,000 versus $306,000 in the
comparable  2000  period.  The  decrease  is attributable to the continued shift
from  research  and  development to commercialization that occurred in 2000.  In
addition  two  engineers  transferred  from  CDT to RJM as part of the ARIS 2000
license  agreement  in  early  2000.

     Patent filing expense increased $1,000 to $53,000 in 2001 versus $52,000 in
the  comparable 2000 period.  For the year, patent expense has increased $24,000
to  $100,000  versus $76,000 in the 2000 comparable period.  The increase is due
to  the  filing  of  several  new  patents  and  maintenance fees resulting from
recently  filed  patents.


                                     - 10 -
<PAGE>
     Interest  income  decreased  $10,000  in 2001 to $3,000 from $13,000 in the
comparable  period  in  2000.  For  the  year,  interest income has decreased to
$6,000 versus the 2000 comparable interest income of $23,000.  This was a result
of  a  decrease in the amount of cash and cash equivalents on hand in the second
quarter  of  2001.

LIQUIDITY  AND  SOURCES  OF  CAPITAL

     In  December  1999,  the Company received its U.S. EPA registration for its
platinum  -  cerium  fuel  catalyst  product  and  began commercial sales of the
product.  Prior  to  this  time  the Company was a development stage enterprise.
The  Company  has  been  primarily  a  research and development company that has
incurred losses since inception aggregating $19,145,000 (excluding the effect of
non-cash  preferred  stock  dividends).  The  Company  expects  to  incur losses
through  the  foreseeable  future  as  it  further pursues its commercialization
efforts.  The  Company  continues  to  be  dependent  upon  sources  other  than
operations  to  finance  its  working  capital  requirements.

     In  December  1995,  the Company raised approximately $10.5 million, net of
offering expenses and broker-dealer commissions through the 1995 Rights Offering
of  its  shares  by  Fuel Tech.  The Company then repaid Fuel Tech approximately
$2.3  million in inter-company loans.  On February 17, 1998, Fuel Tech agreed to
provide  the  Company with up to $500,000 in order to fund its cash requirements
until  such time as the Company obtained the long-term financing it was seeking.
On  May  20, 1998, the $500,000 commitment was converted into a bridge loan (the
"Bridge  Loan").  The Bridge Loan stipulated an automatic conversion into shares
of  Preferred  Stock  upon  the conclusion of a public or private financing that
contributed  a  minimum  of  $1.75  million  of  additional  net proceeds to the
Company.  In  mid-1998,  the  Company  also  received  an additional $900,000 of
financing under the same Bridge Loan (having the same terms and conditions) from
outside  investors.  As more fully described below, in November 1998, the Bridge
Loan  automatically  converted  into  2,800  shares  of  Preferred  Stock.

     In  1997,  the Company repaid $250,000 of a $745,000 promissory demand note
with  Fuel Tech and restructured the remaining amount into a $495,000 promissory
note  (the  "Term  Note")  with  Platinum Plus, Inc. ("Platinum Plus"), a wholly
owned subsidiary of Fuel Tech.  See below for further information concerning the
exchange  of  the  Term  Note  for  shares  of  the  Company's  Preferred Stock.

     In  November  1998, the Company obtained approximately $1.85 million in net
proceeds  against  the  issuance  of  3,753  shares of Preferred Stock through a
private  placement.  As the Company received net proceeds in excess of the $1.75
million  minimum, and in accordance with the terms of the Bridge Loan agreement,
the  $1.4  million  Bridge Loan, mentioned above, converted into 2,800 shares of
Preferred  Stock.  Additionally,  in  an  effort  to  retain its approximate 27%
interest  in  the  Company  (assuming conversion of the Preferred Stock into the
Company's  Common Shares), Fuel Tech elected to exchange its $495,000 Term Note,
and  $20,000  of associated accrued interest from its Bridge Loan and Term Note,
for  1,029 shares of Preferred Stock.  As a result, Fuel Tech owned 2,029 shares
of  the  Company's  Preferred Stock at December 31, 1998.  These shares plus the
1999  and  2000  quarterly  dividends, if converted, along with its Common Stock
ownership would give Fuel Tech an approximate 21.6% interest in the Company on a
fully  converted  basis  at  December  31,  2000.

     In  August/September  1999,  the  Company  received gross proceeds of $1.75
million,  excluding expenses of $29,000, from private investors for the issuance
of  an  additional  3,500 shares of Preferred Stock.  In April 2000, the Company
completed a $1.021 million private placement offering of 1,362 Preferred shares,
excluding  $13,833  of  expenses.  Therefore,  the  Company had 13,218 shares of
Preferred  Stock  issued and outstanding at December 31, 2000.  and issued 1,405
of  preferred  shares  in May 2001 for the  2000 quarterly dividends declared in
2000.  The Company had an additional 804 shares of Preferred Stock issuable upon
demand  for  the  2001  dividends declared.  At June 30, 2001, the Company had a
total  of  15,427 issuable shares of Preferred Stock, which are convertible into
approximately  5.1  million  shares  of  the  Company's Common Stock, ($0.05 par
convertible  at  a  rate  of  1:333.33).

     The  Company  signed  an  agreement with the RJM Corporation on February 2,
2000  that  licensed  RJM  to  sell  CDT's  ARIS 2000 NOx control system for all


                                     - 11 -
<PAGE>
stationary,  marine,  and  locomotive  applications in North, Central, and South
America.  Under  terms of the agreement CDT received an initial $360,000 license
and  inventory  payment  and the opportunity to earn an additional $1,040,000 in
license  revenue  over the next three years based on the performance of the ARIS
2000.  In  addition  to  license  revenue, CDT will earn a royalty on all future
ARIS  2000  sales.  In  April  2001,  the Company amended the February 2000 ARIS
Stationary  NOx Reduction License agreement with the RJM Corporation.  Under the
amended  terms  of  the  RJM  ARIS  license  agreement, the Company will receive
$825,000 in ARIS license revenue, payable in two equal $412,500 payments on June
1, 2001 and September 1, 2001 in lieu of potentially receiving $1,040,000 on the
second  or  third  anniversary.

     In June 2000, the Company received a $160,000 payment from Mitsui & Co. Ltd
for  a  short-term  exclusive  license for Platinum Plus fuel borne catalyst and
ARIS  2000 diesel emission reduction technologies.  In addition to the exclusive
license,  Mitsui  &  Co. received an ARIS 2000 system, Platinum Plus product and
diesel  emissions  consulting  services  from CDT.  The Company recognized sales
revenues  for  these  products  when  they  shipped  and the license revenue was
prorated  over  the  six-month  license  period.

     Effective  as  of  October  28, 1994, Fuel Tech granted two licenses to the
Company  for  all  patents and rights associated with its Platinum Fuel Catalyst
("PFC") technology.  Effective November 24, 1997, the licenses were canceled and
Fuel  Tech  assigned  to  the  Company  all  such  patents  and  rights on terms
substantially  similar  to  the  licenses.  In  exchange for the assignment, the
Company  will  pay  Fuel Tech a royalty of 2.5% of its annual gross revenue from
sales of the PFC's, commencing in 1998.  The royalty obligation expires in 2008.
The  Company  may  terminate  the  royalty obligation to Fuel Tech by payment of
$8,727,273 in 2001 and declining annually to $1,090,910 in 2008.  The Company as
assignee  and owner will maintain the technology at its own expense.  To date no
royalties  have  been  paid  to  Fuel  Tech.

     For  the  six months ended June 30, 2001 and 2000, the Company used cash of
$585,000  and  $793,000  respectively,  in  operating  activities.

     At  June  30,  2001,  and  December 31, 2000, the Company had cash and cash
equivalents  of  $457,000  and $541,000, respectively.  The decrease in cash and
cash equivalents in 2001 was the result of the Company's use of its resources to
fund operations.  The Company anticipates incurring additional losses through at
least  2001  as  it  further  pursues  its  commercialization  efforts.

     As  a  result  of the Company's recurring operating losses, the Company has
been  unable  to  generate  a  positive cash flow.  In management's opinion, the
Company's  cash  balance  at  June  30, 2001 and the remaining $412,500 RJM ARIS
license  payment and the $495,000 license revenue from Mitsui will be sufficient
to  fund  the  Company's  operations  through  December  2001.  The Company will
require  additional  capital to fund its working capital needs in 2001 and 2002.
Although  the Company believes that it will be successful in its capital-raising
efforts, there is no guarantee that it will be able to raise such funds on terms
that will be satisfactory to the Company.  The Company has developed contingency
plans  in  the  event  future  financing efforts are not successful.  Such plans
include  reducing  expenses  and  selling  or  licensing  some  of the Company's
technologies.  Accordingly,  at  June 30, 2001, there is substantial doubt as to
the  Company's  ability  to  continue  as  a going concern. See "Liquidity Going
Concern"  elsewhere  herein  for  additional  information.


                                     - 12 -
<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

               At  the Annual Meeting of the Stockholders of the Company held on
          June  12,  2001a  total  of  5,012,086,  or  66.3%,  of the votes were
          represented  in  person  or by proxy. Both of the Company's Common and
          Series  A Convertible Preferred Stock are included in such total, with
          each  share  of  Preferred  voting  333.33  shares.

               A  total  of  5,003,725  shares  were  cast  for and 8,361 shares
          against  the  election  of the nominees for election as directors as a
          group  with  no  abstentions  or  withheld  shares for either group of
          individuals.

               A  total of 5,011,886 shares were cast for and 200 shares against
          the  approval  of the appointment for Ernst & Young LLP as independent
          auditors  of  the  Company  for  the year 2001, with no abstentions or
          withheld  shares.

Item 5.   Other  Information
          None

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

          b.     Reports  on  Form  8-K
           None


                                     - 13 -
<PAGE>
                         CLEAN DIESEL TECHNOLOGIES, INC.
                                   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.



                         CLEAN DIESEL TECHNOLOGIES, INC.



Date:  August 7, 2001            By:  /s/  Jeremy  D.  Peter-Hoblyn
                                      -----------------------------
                                      Jeremy  D.  Peter-Hoblyn
                                      President  and  Chief  Executive  Officer



Date:  August 7, 2001            By:  /s/  David  W.  Whitwell
                                      ------------------------
                                      David  W.  Whitwell
                                      Vice President and Chief Financial Officer


                                     - 14 -
<PAGE>