<PAGE>

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

                                   FORM 10-Q
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                       __________________________________



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

        For the quarter ended September 30, 2000

                                      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 1-10877

                         TERRA NITROGEN COMPANY, L.P.
            (Exact name of registrant as specified in its charter)

<TABLE>
         <S>                                                                 <C>
                    Delaware                                                              73-1389684
         (State or other jurisdiction of                                     (I.R.S. Employer Identification No.)
         incorporation or organization)


                      Terra Centre
             PO Box 6000, 600 Fourth Street
                    Sioux City, Iowa                                                       51102-6000
        (Address of principal executive office)                                            (Zip Code)
</TABLE>

                        Registrant's telephone number:
                                (712) 277-1340

     At the close of business on October 30, 2000, there were 18,501,576 Common
     Units outstanding.

     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.

 X Yes   ___ No
---

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

                                                                               1

<PAGE>

                         PART I. FINANCIAL INFORMATION

                         TERRA NITROGEN COMPANY, L.P.
                          CONSOLIDATED BALANCE SHEETS
                                (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                    September 30,  December 31,  September 30,
                                                        2000           1999          1999
                                                    -------------  ------------  -------------
<S>                                                 <C>             <C>           <C>
ASSETS
  Current assets:
     Cash and cash equivalents                          $ 19,627      $     13       $     14
     Accounts receivable                                  33,964        29,846         26,840
     Inventory - finished products                        14,330        25,611         25,628
     Inventory - materials and supplies                    9,287        13,501         12,116
     Prepaid expenses and other current assets             1,483         1,583            615
---------------------------------------------------------------------------------------------
  Total current assets                                    78,691        70,554         65,213

  Net property, plant and equipment                      148,701       157,275        159,595
  Other assets                                            13,978        14,595         17,545
---------------------------------------------------------------------------------------------
Total assets                                            $241,370      $242,424       $242,353
=============================================================================================

LIABILITIES AND PARTNERS' CAPITAL
  Current liabilities:
     Short-term note payable to affiliates              $    ---      $ 39,601       $ 41,532
     Accounts payable and accrued liabilities             31,880        19,614         21,290
     Customer prepayments                                  3,804         6,389            677
     Current portion of long-term debt and
      capital lease obligations                            1,423           847          1,017
---------------------------------------------------------------------------------------------
  Total current liabilities                               37,107        66,451         64,516

  Long-term debt and capital lease obligations             8,500           ---            386
  Long-term payable to affiliates                          5,316         5,316          5,316
  Partners' capital                                      190,447       170,657        172,135
---------------------------------------------------------------------------------------------
Total liabilities and partners' capital                 $241,370      $242,424       $242,353
=============================================================================================
</TABLE>

See accompanying Notes to the Consolidated Financial Statements.

                                                                               2
<PAGE>

                          TERRA NITROGEN COMPANY, L.P.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per unit amounts)
                                  (unaudited)

<TABLE>
<CAPTION>

                                   Three Months Ended    Nine Months Ended
                                     September 30,         September 30,
                                      2000       1999       2000       1999
                                   -------    -------   --------   --------
<S>                                <C>        <C>       <C>        <C>
Revenues                           $58,997    $44,145   $214,092   $166,524
Other income                           248        207        548        465
---------------------------------------------------------------------------
Total revenues                      59,245     44,352    214,640    166,989
Cost of goods sold                  54,281     49,085    186,735    166,887
---------------------------------------------------------------------------
Gross profit (loss)                  4,964     (4,733)    27,905        102
Operating expenses                   1,053      2,042      6,923      6,149
---------------------------------------------------------------------------

Operating income (loss)              3,911     (6,775)    20,982     (6,047)

Interest expense                      (275)      (235)    (1,262)    (1,223)
Interest income                          1          7         73        649
---------------------------------------------------------------------------

Net income (loss)                  $ 3,637    $(7,003)  $ 19,793   $ (6,621)
===========================================================================

Net income (loss) allocable to
   limited partners' interest      $ 3,564    $(6,864)  $ 19,396   $ (6,489)
===========================================================================

Net income (loss) per limited
   partnership unit                $   .19    $ (0.37)  $   1.05   $  (0.35)
===========================================================================
</TABLE>

See accompanying Notes to the Consolidated Financial Statements.

                                                                               3
<PAGE>

                         TERRA NITROGEN COMPANY, L.P.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                       Nine Months Ended
                                                                         September 30,
                                                                   2000                1999
                                                                 --------            --------
<S>                                                              <C>                 <C>
Operating activities:

  Net income (loss)                                              $ 19,793            $ (6,621)
  Adjustments to reconcile net income (loss) to net cash
   flows from operating activities:
     Depreciation and amortization                                  9,539               9,717
     Changes in operating assets and liabilities:
       Receivables                                                 (4,118)            (20,178)
       Inventories                                                 15,494              12,712
       Prepaid expenses                                               100               1,824
       Accounts payable, accrued liabilities and
         customer prepayments                                       9,679             (11,795)
     Change in other assets                                           616              (7,185)
     Other                                                            ---                 380
---------------------------------------------------------------------------------------------

Net cash flows from operating activities                           51,103             (21,146)

Net cash flows from investing activities:

  Capital expenditures                                               (964)             (4,622)

Financing activities:

  Net changes in short-term borrowings                            (39,601)             32,251
  Issuance (repayment) of long-term debt
   and capital lease obligations                                    9,076              (7,563)
---------------------------------------------------------------------------------------------
Net cash flows from financing activities                          (30,525)             24,688
---------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents               19,614              (1,080)
Cash and cash equivalents at beginning of period                       13               1,094
---------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                       $ 19,627            $     14
=============================================================================================
</TABLE>

See accompanying Notes to the Consolidated Financial Statements.

                                                                               4
<PAGE>

                         TERRA NITROGEN COMPANY, L.P.

            Notes to Consolidated Financial Statements (Unaudited)


1.   Basis of Presentation

     The consolidated financial statements contained herein should be read in
     conjunction with the consolidated financial statements and notes thereto
     contained in the Terra Nitrogen Company, L.P. ("TNCLP") Annual Report on
     Form 10-K for the year ended December 31, 1999. TNCLP and its operating
     partnership subsidiary, Terra Nitrogen, Limited Partnership (the "Operating
     Partnership"), are referred to herein, collectively, as the "Partnership".

     The accompanying unaudited consolidated financial statements reflect all
     adjustments, which are, in the opinion of management, necessary for the
     fair statement of the results for the periods presented. All of these
     adjustments are of a normal and recurring nature. Results for the quarter
     are not necessarily indicative of future financial results of the
     Partnership.

     Net income per limited partnership unit is computed by dividing net income,
     less a 2% share allocable to the General Partner for the nine months ended
     September 30, 2000 and 1999, respectively, by 18,501,576 limited partner
     units. According to the Agreement of Limited Partnership of TNCLP, net
     income is allocated to the General Partner and the Limited Partners in each
     taxable year in the same proportion as Available Cash for such taxable year
     was distributed to the General Partner and the Limited Partners. If there
     is no cash distribution, net income is allocated to the Limited Partners
     and the General Partner generally based on their respective ownership
     percentages. Distributions of Available Cash are made 98% to the Limited
     Partners and 2% to the General Partner, except that the General Partner is
     entitled, as an incentive, to larger percentage interests (up to 50%) to
     the extent that distributions of Available Cash exceed specified amounts.

2.   Distributions to Unitholders

     The Partnership makes quarterly cash distributions to Unitholders and the
     General Partner in an amount equal to 100% of its Available Cash. No
     distributions were made in 1999. The Partnership has announced a cash
     distribution of $4.2 million ($0.22 per common unit) to be paid in
     November, 2000.

3.   Financing Arrangements

     The Partnership has an arrangement for demand deposits and notes with an
     affiliate to allow for excess Partnership cash to be deposited with or
     funds to be borrowed from Terra Capital, Inc., the parent of the General
     Partner. At September 30, 2000 and 1999, no amounts were deposited with
     Terra Capital, Inc. The amount of the demand notes was $32.3 million at
     September 30, 1999, and bore interest at the rate paid by Terra Capital on
     its short-term borrowings. At September 30, 2000, no demand notes were
     outstanding.

4.   Natural gas costs

     Natural gas is the principal raw material used in the Partnership's
     production of nitrogen products. The Partnership enters into forward
     pricing arrangements for natural gas provided that such arrangements would
     not result in costs that would be greater than expected selling prices for
     nitrogen products. Under those conditions, the Partnership's natural gas
     procurement policy is to effectively fix or cap the price of between 25%
     and 80% of its natural gas requirements for a one-year period and up to 50%
     of its natural gas

                                                                               5
<PAGE>

     requirements for the subsequent two-year period through supply contacts,
     financial derivatives and other forward pricing techniques. Variances from
     this policy are reviewed with the General Partner. The financial
     derivatives are traded in months forward and settlement dates are scheduled
     to coincide with gas purchases during that future period. These contracts
     reference physical natural gas prices or appropriate NYMEX futures contract
     prices. Contract physical prices are frequently based on the Henry Hub
     Louisiana price, but natural gas supplies for the Partnership's production
     facilities are physically purchased from various suppliers which often
     creates a location basis differential between the contract price and the
     physical price of natural gas. Accordingly, the use of financial
     derivatives may not exactly offset the change in the price of physical gas.

     The Partnership has entered into forward pricing positions for a portion of
     its natural gas requirements for the remainder of 2000 and part of 2001,
     consistent with its policy. As a result of its policies, the Partnership
     has reduced the potential adverse financial impact of natural gas price
     increases during the forward pricing period, but conversely, if natural gas
     prices were to fall, the Partnership will incur higher costs. Contracts
     were in place at September 30, 2000 to cover approximately 20% of natural
     gas requirements for the succeeding twelve months. Unrealized gains from
     forward pricing positions totaled $11.7 million as of September 30, 2000.
     The ultimate amount recognized by the Partnership will be dependent on
     prices in effect at the time of settlement for unrealized positions at
     September 30, 2000. The Partnership also had $5.1 million of realized gains
     on closed contracts relating to future periods that have been deferred to
     the respective period.

5.   Idled facilities

     On June 1, 2000, the Partnership reported that it would not restart ammonia
     and urea production at its Blytheville, Arkansas plant in response to high
     natural gas costs. The plant resumed production on August 19, 2000.

                                                                               6
<PAGE>

        Management's Discussion and Analysis of Financial Condition and
                             Results of Operations

                             RESULTS OF OPERATIONS

              Three months ended September 30, 2000 compared with
                     three months ended September 30, 1999

Volumes and prices for the three-month periods ended September 30, 2000 and 1999
were as follows:

<TABLE>
<CAPTION>
                             2000                           1999
                   -------------------------     -------------------------
                       Sales       Average           Sales      Average
                      Volumes    Unit Price         Volumes    Unit Price
                    (000 tons)     ($/ton)        (000 tons)    ($/ton)
                   ------------ ------------     ------------ ------------
<S>                <C>          <C>              <C>          <C>
Ammonia                 56          $181              80          $99
UAN                    520            86             497           58
Urea                    30           145              86           88
</TABLE>

Revenues for the quarter ended September 30, 2000 increased $14.9 million, or
34%, compared with the same quarter in 1999 primarily as the result of higher
prices for all Partnership products and increased demand for UAN. The higher
prices reflected lower industry inventories as a result of permanent plant
closures by other producers and production curtailment during the last half of
1999.

Third quarter gross profits increased $9.7 million from 1999. Higher UAN sales
prices and volumes increased gross profits by $15.9 million.  These increases
were partly offset by higher natural gas costs, which increased from $2.32/MMBtu
in 1999 to $3.47/MMBtu in 2000 (net of $9.8 million in forward pricing gains).
The impact on the 2000 third quarter gross profits from lower sales volumes of
ammonia and urea were essentially offset by higher prices.

Operating expenses were $1.0 million lower in 2000 than in 1999 primarily as the
result of reduced General Partner charges for computer expenses and employee
compensation.  Net interest expense of $274,000 was comparable to the 1999 third
quarter.

                                                                               7
<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1999

Volumes and prices for the nine-month periods ended September 30, 2000 and 1999
were as follows:

<TABLE>
<CAPTION>
                             2000                           1999
                   -------------------------     -------------------------
                       Sales       Average           Sales      Average
                      Volumes    Unit Price         Volumes    Unit Price
                    (000 tons)     ($/ton)        (000 tons)    ($/ton)
                   ------------ ------------     ------------ ------------
<S>                <C>          <C>              <C>          <C>
Ammonia                 317         $149              365         $112
UAN                   1,863           75            1,589           61
Urea                    215          130              311           93
</TABLE>

Revenues for the nine months ended September 30, 2000 increased $47.6 million,
or 29% compared with the 1999 period as a result of increased sales prices of
all of the Partnership products, caused primarily by lower industry wide
inventory levels.  In addition, UAN volumes increased 17%, while volumes of
ammonia and urea decreased 13% and 31%, respectively.  UAN volumes increased due
to plant closures by other domestic producers as well as mild winter weather,
which promoted early planting and top dressing in the Southeast.

Gross profit during the 2000 first nine months totaled $27.9 million or $27.8
million more than the prior year period.  Higher UAN sales prices and volumes
increased gross profits by $42.8 million. Natural gas costs, net of $18.8
million in forward pricing gains, averaged $2.85/MMBtu during the 2000 first
nine months compared to $2.25/MMBtu in 1999. The impact on the 2000 first nine
months gross profits of decreased sales volumes of ammonia and urea were
essentially offset by higher prices.

Operating expenses were $.8 million higher in 2000 than in 1999, primarily as
the result of absorbing a higher percentage of the General Partner's operating
expenses after its Distribution business was sold.  Net interest expense of $1.3
million was comparable to the first nine months of 1999.  Interest income
decreased $576,000 compared with the 1999 period due to lower levels of cash and
short-term investments.

Capital resources and liquidity

Net cash flows from operations in the first nine months of 2000 totaled $51.1
million with $21.2 million generated from reductions to working capital balances
and $29.9 million of operating income after non-cash charges.  Most of the
working capital reductions result from lower inventory balances which reflect,
in part, the Partnership's decision, announced on June 1, 2000, to idle the
Blytheville plant in response to high natural gas costs.  The plant resumed
production on August 19, 2000.

The Partnership's principal needs for funds are for support of its working
capital and capital expenditures. The Partnership intends to fund its needs
primarily through net cash flows from operating activities, and, to the extent
required, from funds borrowed from others, including borrowings from Terra
Capital, Inc., the parent of the General Partner.  The Partnership believes

                                                                               8
<PAGE>

that such sources of funds will be adequate to meet the Partnership's working
capital needs and fund the Partnership's capital expenditures for at least the
next 12 months.

On April 7, 2000, the Partnership with Terra Industries Inc., Terra Capital and
other affiliates entered into an asset based financing agreement that provides
for the Partnership to borrow amounts generally up to 85% of eligible
receivables plus 65% of eligible inventory plus $10 million. The new financing
agreement, which expires January 2003, bears interest at floating rates and is
secured by substantially all of the Partnerships' assets. The new agreement also
requires the Partnership and its affiliates to adhere to certain limitations on
additional debt, capital expenditures, acquisitions, liens, asset sales,
investments, prepayments of subordinated indebtedness, changes in lines of
business and transactions with affiliates. In addition, Terra Industries is
required to maintain minimum levels of earnings before interest, income taxes,
depreciation and amortization (as defined in the financing agreement) computed
on a quarterly basis. Failure to meet these covenants would require Terra to
incur additional costs to amend the bank facilities or could result in
termination of the facilities.

Quarterly distributions to the Partners of TNCLP are based on Available Cash for
the quarter as defined in the Agreement of Limited Partnership of TNCLP.
Available Cash is defined generally as all cash receipts less all cash
disbursements, adjusted for changes in certain reserves established as the
General Partner determines in its reasonable discretion to be necessary.  In
consideration of the Partnership's working capital and operating cash needs at
September 30, 2000, the General Partner established reserves that resulted in
$4.2 million of Available Cash generated during the 2000 third quarter, which
will be distributed during November, 2000.

Capital expenditures

Capital expenditures totaled $1.0 million for the first nine months of 2000.
For the remainder of 2000, the Partnership plans to spend less than $5 million
for routine equipment replacement.

Limited Call Right

If at any time not more than 25% of the Common Units are held by non-affiliates
of the General Partner, either TNCLP, the General Partner or its affiliates may
call all such outstanding units held by non-affiliated persons in accordance
with the terms of the TNCLP partnership agreement.  TNCLP is required to give at
least 30 but not more than 60 days notice of its decision to purchase the
outstanding Common Units.  The purchase price per unit is required to be the
greater of (1) the average of the previous twenty trading days closing prices as
of the date five days before the purchase is announced or (2) the highest price
paid by the General Partner or any of its affiliates for any unit within 90 days
preceding the date the purchase is announced.

The General Partner and its affiliates own 72.4% of the Common Units as of
October 31, 2000.  Under existing authorization of the board of directors of
Terra Industries, Inc., the indirect parent of the General Partner, additional
Common Units may be purchased from time to time on the open market and through
privately negotiated transactions by affiliates of the General Partner and such
purchases may bring this ownership level above 75%.  Although TNCLP and its
affiliates reserve the right to consider in the future whether to acquire all of
the Common Units, they do not have any present plan or intention to do so.

                                                                               9
<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards 133 (SFAS 133),  "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 is effective for fiscal years
beginning after June 15, 2000, as amended by SFAS 137 "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133". The Partnership has reviewed SFAS 133 and intends to
implement the standard on January 1, 2001. At this time, the Partnership has not
determined the impact SFAS 133 will have on its financial position, results of
operations or cash flows.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements".  SAB 101 summarizes the SEC's view in applying generally accepted
accounting principles to selected revenue recognition issues.  The application
of the guidance in SAB 101 will be required in the Company's fourth quarter of
2000.  The Partnership does not expect the adoption of SAB 101 to have material
effect on its financial statements.

FORWARD LOOKING PRECAUTIONS
---------------------------

Information contained in this report, other than historical information, may be
considered forward looking.  Forward looking information reflects Management's
current views of future events and financial performance that involve a number
of risks and uncertainties.  The factors that could cause actual results to
differ materially include, but are not limited to the following: general
economic conditions within the agricultural industry, competitive factors and
price changes (principally, sales prices of products and natural gas costs),
changes in product mix, changes in the seasonality of demand patterns, changes
in weather conditions, changes in agricultural regulations, and other risks
detailed in the Partnership's Securities and Exchange Commission filings, in
particular the "Factors that Affect Operating Results" section of its most
recent Form 10-K.

                                                                              10
<PAGE>

                          Part II.  Other Information


Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits:

                    27   Financial Data Schedule. (EDGAR only)

     (b)  Reports on Form 8-K:

                    None



                                   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.

                                         TERRA NITROGEN COMPANY, L.P.

                                     By: TERRA NITROGEN CORPORATION
                                         as General Partner


                                     By: /s/ Francis G. Meyer
                                         ----------------------------------
                                         Francis G. Meyer
                                         Vice President
                                         (Principal Accounting Officer)



Date: October 30, 2000

                                                                              11