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



[X]   Quarterly  Report Pursuant to Section  13  or  15(d)  of  the
Securities Exchange Act of 1934

     For the Quarterly period ended September 30, 1998.

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

       For   the  transition  period  from  _____________________to
_________________.
     Commission file number 1-3439

                    STONE CONTAINER CORPORATION
      (Exact name of registrant as specified in its charter)
                                 
Delaware                                          36-2041256
(State or other jurisdiction of incorporation   (I.R.S. employer
 or organization)                                 identification no.)

150 North Michigan Avenue, Chicago, Illinois             60601
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number:     312-346-6600

Indicate by check mark (x) 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 requirement
for the past 90 days.

               Yes    x                 No  ______

Number of common shares outstanding as of November 10, 1998:
104,977,686
<PAGE>
<TABLE>

                  PART I.  FINANCIAL INFORMATION
                   ITEM 1.  FINANCIAL STATEMENTS
           STONE CONTAINER CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                          September 30,      December 31,
(in millions)                                     1998*              1997
<S>                                      <C>               <C            
                                                            >
Assets                                                                   
Current assets:                                                          
Cash and cash equivalents                $         96.4     $       112.6
Accounts and notes receivable (less                                      
allowances of $32.2 and $27.8)                    633.4             652.7
Inventories                                       700.4             716.0
Other                                             116.4             114.4
     Total current assets                       1,546.5           1,595.7
Property, plant and equipment                   4,898.5           4,857.3
Accumulated depreciation and                  (2,603.2)         (2,479.8)
amortization
     Property, plant and equipment-net          2,295.3           2,377.5
Timberlands                                        47.3              49.6
Goodwill                                          425.0             444.0
Investment in non-consolidated                    768.3             878.1
affiliates
Other                                             362.6             479.2
Total assets                             $      5,445.0    $      5,824.1
                                                                         
Liabilities and stockholders' equity                                     
Current liabilities:                                                     
Accounts payable                         $        277.2     $       327.9
Current maturities of long-term debt              798.7             415.9
Income taxes                                       23.2              26.6
Accrued and other current liabilities             353.2             318.6
     Total current liabilities                  1,452.3           1,089.0
Senior long-term debt                           3,202.2           3,238.0
Subordinated debt                                 519.7             697.5
Non-recourse debt of consolidated                   8.4                --
affiliates
Other long-term liabilities                       327.7             306.7
Deferred taxes                                    153.6             216.0
Commitments and contingencies (Note                                      
12)
                                                                         
Stockholders' equity:                                                    
  Series E preferred stock                        115.0             115.0
  Common stock (105.0 and 99.3 shares                                    
outstanding)                                    1,033.2             966.3
  Accumulated deficit                           (980.7)           (479.5)
  Accumulated other comprehensive               (386.3)           (324.6)
income
  Unamortized expense of restricted                (.1)              (.3)
stock plan
     Total stockholders' equity                 (218.9)             276.9
(deficit)
Total liabilities and stockholders'      $      5,445.0     $     5,824.1
equity
<FN>
               *Unaudited; subject to year-end audit
 The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
           STONE CONTAINER CORPORATION AND SUBSIDIARIES
   CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<CAPTION>               Three months ended           Nine months ended
                          September 30,                September 30,
(in millions except         1998           1997          1998          1997
per share)
<S>                  <C>            <C>            <C>          <C>        
Net sales            $   1,218.2      $ 1,182.8    $  3,757.4     $ 3,563.9
Cost of products sold    1,025.1          998.3       3,111.6       3,001.8
Selling, general           150.5          135.5         443.5         423.1
and administrative
expenses
Depreciation and            67.6           73.9         203.6         233.5
amortization
Equity loss from            40.3           16.9          76.0          40.1
affiliates
Other (income)              66.4          (6.6)         113.4        (10.4)
expense-net
Loss before                                                                
interest expense,                                                          
income taxes,                                                              
minority interest         (131.7)        (35.2)        (190.7)       (124.2)
and extraordinary                                                       
charges
Interest expense          (117.4)       (114.7)        (354.7)       (340.9)
Loss before income                                                         
taxes, minority                                                            
interest and extra-                                                          
ordinary charges          (249.1)       (149.9)        (545.4)       (465.1)
(Provision) credit                                                         
for income taxes          (26.4)           51.3          44.7         162.4
Minority interest             --           (.1)          (.1)          (.1)
Loss before                                                                
extraordinary            (275.5)         (98.7)        (500.8)       (302.8)
charges                                                                 
Extraordinary                                                              
charges from early                                                         
  extinguishment                                                           
of debt (net of                                                            
income                        --             --          (.4)        (13.3)
  tax benefit)
Net loss                 (275.5)         (98.7)        (501.2)      (316.1)
Preferred stock                                                            
dividends                  (2.0)          (2.0)         (6.1)         (6.0)
Net loss                                                                   
applicable to        $   (277.5)      $ (100.7)    $   (507.3)    $  (322.1)
common shares                                                           
                                                                           
Accumulated                                                                
deficit, beginning   $    (705.2)      $ (270.9)    $   (479.5)    $  (51.5)
of period                                                  
Net loss                  (275.5)         (98.7)        (501.2)      (316.1)
                                                                        
Cash dividends on                                                          
common and                                                                 
preferred                     --             --            --         (2.0)
 stock
Accumulated                                                                
deficit, end of      $    (980.7)      $ (369.6)    $   (980.7)     $  (369.6)
period                                                                  
                                                                           
Per share of                                                               
common stock:
Loss before                                                                
extraordinary                                                              
charges -            $    (2.66)      $  (1.01)    $   (5.01)   $    (3.11)
  Basic/Diluted
Extraordinary                                                              
charges from early                                                         
  extinguishment              --             --            --         (.13)
of debt
Net loss             $    (2.66)      $  (1.01)    $   (5.01)     $  (3.24)
-Basic/Diluted
                                                                           
Cash dividends       $        --      $      --    $       --     $      --
Common shares                                                              
outstanding                                                                
(weighted average,         104.3           99.3         101.3          99.3
in millions)
<FN>
               Unaudited; subject to year-end audit
 The accompanying notes are an integral part of these statements.
                                 
</TABLE>
                                 
<TABLE>
                   STONE CONTAINER CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>                          Three months ended     Nine months ended
                                     September 30,          September 30,
(in millions except per share)          1998      1997        1998       1997
<S>                               <C>          <C>       <C>         <C>
Cash flows from operating                                                    
activities:
Net loss                          $   (275.5)  $ (98.7)  $  (501.2)  $ (316.1)
Adjustments to reconcile net                                                 
loss to net cash provided by
(used in)operating activities:
   Depreciation and                     67.6      73.9       203.6      233.5
     amortization
   Deferred taxes                       20.8     (61.6)     (62.2)     (182.4)
   Foreign currency transaction
    losses                              11.8        .7        20.3        4.3
   Equity loss from affiliates          40.3      16.9        76.0       40.1
   Write-off investment in                --        --        53.5         --
       SVCPI
   Write-down of long-term              55.0        --        55.0         --
     assets/investments
   Extraordinary charges from                                                
     early extinguishment of debt         --        --          .4       13.3
   Other-net                            48.3      20.2        80.4       62.0
                                                                             
Changes in current assets and                                                
liabilities net of adjustments
for acquisitions and a
disposition:
   (Increase) decrease in                                                    
     accounts and                       10.3     (28.7)       12.5     (81.3)
     notes receivable-net                            
   (Increase) decrease in               29.8     (12.9)       12.8       18.6
     inventories                                          
   Decrease in other current            40.1      17.7        24.4       17.9
     assets
   Increase (decrease) in                                                    
     accounts payable and              (20.1)      80.3      (24.5)       (.9)
     other current liabilities
Net cash provided by (used in)          28.4       7.8      (49.0)     (191.0)
operating activities                                                        
                                                                             
Cash flows from financing                                                    
activities:
Payments made on debt                 (156.3)    (36.3)     (221.3)    (467.4)
Payments by consolidated                                                     
affiliates on                          (1.6)      (.5)       (1.6)     (13.4)
  non-recourse debt
Borrowings                             190.5     101.7       434.5      905.9
Proceeds from issuance of                 --        .1         2.4         .1
common stock
Cash dividends                            --        --          --      (2.0)
Net cash provided by financing          32.6      65.0       214.0      423.2
activities
                                                                             
Cash flows from investing                                                    
activities:
Capital expenditures                  (41.7)     (35.2)     (109.3)    (93.2)
Proceeds from sales of assets           1.3        2.4         2.7       5.5
Investments in and advances to        (24.2)      (5.4)      (72.5)    (14.3)
affiliates, net
Other-net                              (8.4)       1.8        (.4)     (25.3)
Net cash used in investing            (73.0)     (36.4)    (179.5)    (127.3)
activities                                                                
                                                                             
Effect of exchange rate changes        (1.1)      (.3)       (1.7)      (2.7)
on cash
Net increase (decrease) in cash                                              
and cash                              (13.1)      36.1      (16.2)      102.2
  equivalents
Cash and cash equivalents,             109.5     178.7       112.6      112.6
beginning of period
Cash and cash equivalents, end    $     96.4   $ 214.8   $    96.4   $  214.8
of period

<FN>
     See Note 11 regarding supplemental cash flow information.
               Unaudited; subject to year-end audit
 The accompanying notes are an integral part of these statements.

</TABLE>
              STONE CONTAINER CORPORATION AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1:  Basis of Presentation

Pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC") for Form 10-Q, the financial statements, footnote
disclosures and other information normally included in the financial
statements prepared in accordance with generally accepted accounting
principles have been condensed.  These financial statements, footnote
disclosures and other information should be read in conjunction with the
financial statements and the notes thereto included in Stone Container
Corporation's (the "Company's") latest Annual Report on Form 10-K, as
amended by a Form 10-K/A.  In the opinion of the Company, the
accompanying unaudited consolidated financial statements contain all
normal recurring adjustments necessary to fairly present the Company's
financial position as of September 30, 1998 and the results of operations
and cash flows for the three and nine month periods ended September 30,
1998 and 1997.

NOTE 2:  Reclassifications

Certain prior year amounts have been restated to conform with the current
year presentation in the Consolidated Balance Sheets and in the
Statements of Operations and Accumulated Deficit.

NOTE: 3:  Pending Merger

On May 10, 1998, the Company agreed to merge (the "Merger") with a
subsidiary of Jefferson Smurfit Corporation ("JSC"), a U.S. integrated
manufacturer of paperboard, paper and packaging products.  The terms of
the Merger are set forth in an Agreement and Plan of Merger, dated as of
May 10, 1998, among JSC, JSC Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of JSC, and the Company, as
amended by Amendment No. 1 dated as of October 2, 1998 (the "Merger
Agreement").  In the Merger, each share of the Company's common stock
will be converted into 0.99 of a share of JSC's common stock, par value
$0.01 per share (the "JSC Common Stock"), and JSC will be renamed Smurfit-
Stone Container Corporation.  The Merger is intended to constitute a tax-
free reorganization under the Internal Revenue Code of 1986, as amended,
and will be accounted for as a purchase.

     The shareholders of the Company and JSC will vote on the Merger on
November 17, 1998.  Subject to shareholder approval, the Merger is
expected to close shortly thereafter.

     The foregoing summary of the original Agreement and Plan of Merger
is qualified in its entirety by reference to the text of the original
Agreement and Plan of Merger, a copy of which is filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K dated May 12, 1998 and which is
incorporated herein by reference.  The Merger Agreement (as amended by
Amendment No. 1 thereto) is included in the Joint Proxy
Statement/Prospectus dated October 8, 1998 of JSC and the Company (the
"Joint Proxy Statement/Prospectus").

	If the Merger is consummated, Smurfit-Stone Container Corporation
("SSCC") is expected to have approximately $7 billion of debt outstanding
after the Merger on a consolidated basis (without giving effect to any
divestitures after the Merger) and the Company will need to continue to
address its financial condition and liquidity needs.  As described in the
Joint Proxy Statement/Prospectus, JSC intends to amend its existing
credit agreement to borrow $550 million (the "JSC Amendment") and use a
portion of such borrowing to make a $300 million captial contribution to
the Company at the time of the Merger.  There can be no assurance that
the JSC Amendment will become effective.  If the JSC Amendment does not
become effective, there can be no assurances to the extent to which any
alternative financings would be available or the terms of any such
alternative.  Also in connection with the Merger, the Company expects to
amend and restate its Credit Agreement to, among other things, extend
the maturity date of its revolving credit facility and certain term 
loan payments.  See "Financial Condition and Liquidity."  If the Merger
is consummated and the JSC Amendment is effected, it is expected that
the funds from the JSC Amendment, proceeds from divestitures and funds
generated from operations will satisfy the Company's short term liquidity
needs.  The Company does not expect such sources of funds to satisfy
its long term liquidity needs and will needs to obtain additional debt
or equity financing, if available and available on acceptable terms.
A further description of the financial position of the Company and SSCC
following the Merger, if consummated, is set forth in the Joint Proxy
Statement/Prospectus under "Risk Factors - Substantial Leverage; - Ability
to Service Debt/Liquidity; and - Restrictive Covenants/Limited Ability
to Incur Indebtedness."
     

NOTE 4:  Acquisition/Dispositions

On September 4, 1998,  the Company's Canadian subsidiary, Stone Container
(Canada) Inc. ("Stone Canada") purchased MacMillan Bloedel Ltd.'s
("MacBlo") 50 percent interest in MacMillan Bathurst Inc. ("MBI") for
$185 million (Canadian).  MBI is a Canadian corrugated container company
that had sales of $462 million (Canadian) in 1997.  Stone Canada, which
already owned 50 percent of MBI, immediately resold the newly acquired 50
percent interest to a Canadian subsidiary of Jefferson Smurfit Group PLC
for the same amount. 

     On September 24, 1998 the Company and Waste Management, Inc ("Waste
Management.") announced that they would terminate their recovered paper
marketing joint venture Paper Recycling International, L.P.  (PRI) at the
end of this year.  The assets and accounts of  PRI will be divided
between the  Company and Waste Management.  Waste Management will receive
PRI's waste paper marketing efforts and the Company will receive PRI's
waste paper procurement operations.

     On October 15, 1998 the Company sold its Snowflake, Arizona
newsprint manufacturing operations and related assets (including the
capital stock of The Apache Railway Company, a short-line railway that
services the Snowflake facility) to Abitibi-Consolidated Inc. for
approximately $250 million.  The Company retained ownership of a
corrugating medium machine located in the facility.  Abitibi-Consolidated
will operate the medium machine on behalf of the Company.  Approximately
$75 million of the proceeds from the sale were used to repay amounts
outstanding under the Company's revolving credit facilities.  The
remaining net proceeds from the sale have been deposited in a cash
collateral account with the agent for the lenders under the Company's
Credit Agreement (as defined below).  If the Merger is consummated and
the Company's Credit Agreement is amended in connection therewith, the
Company will be permitted and intends to use the net proceeds to repay a
portion of its $240,000,000 principal amount of 11-7/8% Senior Notes due
December 1, 1998.  Otherwise, the net proceeds are required to be used to
repay indebtedness under the Credit Agreement.

NOTE 5:  Asset Write-downs

Venepal SACA ("Venepal"), a forest products company based in Venezuela
and 20 percent owned non-consolidated affiliate of the Company, is
experiencing significant liquidity concerns as a result of adverse
market conditions that caused a severe drop in third quarter sales
(to a five year low) combined with high debt service costs.
Venepal is currently in discussions with its creditors to restructure
its debt, has announced work force reductions and is considering asset
sales to generate cash.  As a result, during the third quarter, the
Company concluded that the delcine in value of its equity investment
in Venepal stock was other than temporary and wrote down the investment
to fair market value of approximately $2 million.  The write down resulted
in a $30 million pretax loss that was reflected as a component of Other
income (expense) - net in the Company's Consoldiated Statements of
Operations.

     Also in the third quarter of 1998, the Company determined that it
would sell or liquidate its remaining non-core wood products assets.
Accordingly, the Company recorded a pretax charge of $19 million in the
current period to write these assets down to estimated fair value less
cost to sell.  Such assets held for sale (which approximate $19 million
at September 30, 1998) are included in the other current assets section
of the Consolidated Balance Sheet.

     On July 23, 1998 Stone Venepal (Celgar) Pulp, Inc. ("SVCPI"), a non-
consolidated Canadian affiliate of the Company, filed for bankruptcy
protection. The Company and its partners, after evaluating SVCPI's losses
and cash flow under current market conditions, decided to end their
relationship with SVCPI.  As a result, the Company recorded a one-time
write-off of $54 million in the second quarter of 1998 related to its
interest in SVCPI.  The lenders to SVCPI and any other SVCPI creditors do
not have recourse against the Company.

NOTE 6:  Adoption of New Accounting Standards

Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") which establishes standards for reporting and display of
comprehensive income and its components in the financial statements.
Comprehensive income represents the change in stockholders' equity during
a period resulting from transactions and other events and circumstances
from non-owner sources.  It includes all changes in equity during a
period except those resulting from investments by owners and
distributions to owners.  The Company has restated its prior period
financial statements for comparative purposes as required.  The adoption
of SFAS 130 had no impact on the Company's consolidated results of
operations, financial position or cash flows.


                          Three months ended        Nine months ended
                            September  30,           September  30,
(in millions)                1998         1997         1998         1997
Net loss                $  (275.5)   $  (98.7)    $  (501.2)   $  (316.1)
Other comprehensive                                                     
income, net of tax:
  Foreign currency          (20.4)       (4.0)        (61.7)       (58.7)
   translation
Comprehensive income    $  (295.9)   $ (102.7)    $  (562.9)    $ (374.8)
  (loss)                                                           

                  Accumulated through               Accumulated through
                  September  30, 1998               September 30, 1997
                        Current                           Current        
             Beginni    Period      Ending    Beginnin     Period     Ending
                ng      Change     Balance        g        Change    Balance
             Balance                           Balance
Minimum                                                                      
pension                                                                      
liability                                                                    
adjustment   $ (31.3)   $    --    $ (31.3)   $  (42.7)   $     --   $ (42.7)
Foreign                                                                      
currency                                                                     
translation                                                                    
adjustment    (293.3)     (61.7)    (355.0)     (178.8)       (58.7)  (237.5)
Accumulated                                                                    
other                                                                     
comprehen-                                                                   
sive         $(324.6)   $ (61.7)   $(386.3)  $  (221.5)   $   (58.7)  $ (280.2)
income                                                            

Pensions and Other Postretirement Benefits
In February 1998, the Financial Accounting Standards Board ("FASB")
issued Statement No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," which is effective for fiscal years
beginning after December 15, 1997, and requires restatement of prior year
periods presented.  The Statement does not change the measurement or
recognition of pension and other postretirement plans.  It standardizes
the disclosure requirements, requires additional information on changes
in benefit obligations and fair values of plan assets, and eliminates
certain disclosures.  The Company will adopt the new disclosure rules in
its year-end 1998 financial statements.

Start-up Costs
On April 3, 1998 Statement of Position 98-5 "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5") was issued which requires that the
costs of start-up activities be expensed as incurred.  SOP 98-5 is
effective for financial statements for fiscal years beginning after
December 15, 1998.  The Company will adopt SOP 98-5 effective January 1,
1999 by recognizing a charge of approximately $8 million, net of tax, as
a cumulative effect of an accounting change.

Derivative Instruments
In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999.  This
Statement requires that all derivatives be recorded in the balance sheet
as either assets or liabilities and be measured at fair value.  The
accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and the resulting designation.    The
Company is in the process of evaluating this standard and does not
anticipate that it will have a material effect on the Company's financial
statements.

NOTE 7:  Reconciliation of Basic and Diluted EPS

           Three months ended September      Nine months ended September 30,
                        30,
              1998          1997                 1998                 1997
                                                                             
In millions, except per share data                                      

          Income          Income            Income            Income
          (Loss)  Shares  (Loss)  Shares    (Loss)  Shares    (Loss)  Shares
Loss                                                                   
before                                                         
extra-                                                         
ordinary                                                         
charges  $(275.5)        $(98.7)           $(500.8)           $(302.8)
Less:                                                                  
Preferred                                                              
dividends   (2.0)          (2.0)              (6.1)              (6.0)
Basic EPS                                                                  
Income                                                                       
available                                                                       
to common                                                                       
stock-    (277.5)  104.3 (100.7)    99.3    (506.9)    101.3   (308.8)   99.3
holders 
Effect                                                                 
of
Dilutive
Securities:
Convertible                                                                  
Debt        (a)     (a)    (a)      (a)       (c )     (c )      (c)     (c )
                                                                             
Exchan                                                                       
geable                                                                       
Prefer                                                                       
red         (b)     (b)      (b)      (b)      (d)      (d)      (d)      (d)
Stock
Diluted                                                                       
EPS      $(277.5) 104.3  $(100.7)   99.3   $(506.9)   101.3   $(308.8)   99.3
 
Basis Earnings Per
Share     $(2.66)         $(1.01)           $(5.01)             $(3.11)
Amount

Diluted Earnings Per
Share     $(2.66)         $(1.01)           $(5.01)             $(3.11)
Amount
__________________
(a)  Convertible debt effects of $.6 million and 2.0 million shares in
     1998 and $1.3 million and 6.4 million shares in 1997 are excluded from
     the diluted EPS computation because they are antidilutive.
(b)  Exchangeable preferred stock effects of $2.0 million and 3.4 million
     shares are excluded from the dilutive EPS computation because they are
     antidilutive.
(c)  Convertible debt effects of $3.1 million and 4.9 million shares in
     1998 and $3.8 million and 6.4 million shares in 1997 are excluded from the
     diluted EPS computation because they are antidilutive.
(d)  Exchangeable preferred stock effects of $6.1 million and 3.4 million
     shares are excluded from the dilutive EPS computation because they are
     antidilutive.

NOTE 8:  Inventories

Inventories are summarized as follows:

                                 September        December
                                       30,             31,
(in millions)                         1998            1997
Raw materials and supplies        $  244.2      $    263.5
Paperstock                           322.5           342.1
Work in process                       20.6            21.5
Finished products                    132.7           108.5
                                     720.0           735.6
Excess of current cost over                        
LIFO Inventory value                 (19.6)          (19.6)
                          
Total inventories                 $  700.4      $    716.0

NOTE 9:  Summarized Financial Information of Non-Consolidated Affiliates

Combined summarized financial information for the Company's non-
consolidated affiliates that are accounted for under the equity method of
accounting is presented below:

                           Three months ended        Nine months ended
                              September 30,            September 30,
(in millions)                 1998         1997         1998         1997
Results of operations:                                                   
  Net sales               $  699.0    $  1,216.9   $  2,811.2    $  2,850.7
  Cost of products sold      613.7       1,028.9      2,254.6       2,329.0
  Loss before income                                                     
  taxes, minority interest                                                    
  and extraordinary         (221.0)       (41.8)       (278.1)       (97.1)
  charges
  Net loss                  (172.8)       (50.8)       (230.3)       (96.4)

NOTE 10:  Debt

Current maturities of long-term debt at September 30, 1998 and December
31, 1997 consisted of the following:

                                       September        December
                                             30,             31,
(in millions)                              1998            1997
11 7/8% Senior Notes due December 1,   $  239.6      $    239.7
1998
Revolving Credit Facility due May         406.0              --
15, 1999
11% Senior Subordinated Notes due         119.4              --
August 15, 1999
12 5/8% Senior Notes due July 15,            --           150.0
1998
Other                                      33.7            26.2
Total current maturities of  long-     $  798.7      $    415.9
term debt


     On April 3, 1998, Stone Container GMBH, a German subsidiary of the
Company, entered into a loan facility agreement with Dresdner Bank AG for
90 million Deutsche Marks at an interest rate equal to LIBOR plus 2
percent.  The loan facility expires April 30, 2005.  The proceeds from
the facility were loaned to the Company and were applied against amounts
outstanding on the Company's term loans under its Credit Agreement.

     On June 16, 1998, the Company issued a notice to redeem all of its
outstanding 8-7/8 percent Convertible Senior Subordinated Notes due 2000
(the "Notes") on July 15, 1998 at a redemption price equal to 101 percent
of the principal amount of each Note, plus accrued interest.  The $58.4
million of Notes were convertible into shares of common stock at a
conversion price of $11.55 per share.  All of the Notes were converted in
July (prior to the redemption date), resulting in the issuance of
5,060,516 shares of common stock.

     On July 15, 1998, the Company repaid its 12-5/8 percent Senior Notes
at maturity with borrowings under its revolving credit facility.

     See also the "Outlook" section of the MD&A for a discussion of the
Company's liquidity and financial condition.

NOTE 11:  Additional Cash Flow Statement Information

The Company's non-cash investing and financing activities and cash
payments (receipts) for interest and income taxes were as follows:

                          Three months ended        Nine months ended
                            September 30,             September 30,
(in millions)                1998         1997         1998         1997
Decrease in debt due                                                    
to deconsolidation of                                                   
affiliate (1)           $      --    $      --    $      --    $   538.0
Increase in debt due                                                    
to consolidation of                                                     
affiliate (2)                  --           --         11.2        264.9
Capital lease                                                           
obligation incurred            .3           --          1.2           .9
Issuance of common                                                      
stock for                                                               
extinguishment of            59.1           --         59.3           --
debt
                                                                        
Cash paid during the                                                    
periods for:                     
Interest (net of                                                        
capitalization)         $   110.4    $    99.6    $   328.9    $   310.5
Income taxes (net of                                                    
refunds)                      5.8       (27.0)         20.7       (28.6)

__________
(1)  Decrease in 1997 due to the sale of a portion of the Company's
     interest in SVCPI on June 26, 1997.  Such amount includes the $264.9
     million of debt assumed from CITIC as discussed below.
(2)  Increase in 1997 due to the acquisition of CITIC's interest in the
     Celgar Mill on April 4, 1997.

NOTE 12:  Commitments and Contingencies

On April 6, 1998, a suit was filed against the Company in Los Angeles
Superior Court by Chesterfield Investments and DP Investments L.P. (the
"Plaintiffs") alleging that the Company owes them approximately $120
million relating to the Company's purchase of the Plaintiffs' interest in
Stone Savannah River Pulp & Paper Corporation ("SSR").  In 1991, the
Company purchased from Chesterfield Investments its shares of common stock
of SSR for approximately $6 million plus a contingent payment payable in
March 1998 based upon the performance of the operations that were
contained in SSR.  The Company is vigorously disputing the Plaintiffs'
calculation of the contingent payment amount.  The Company has settled
the portion of the suit relating to amounts owed to DP Investment L.P.

     In May 1998, four putative class action complaints were filed
against the individual directors of the Company, the Company and JSC in
the Court of Chancery of the State of Delaware in and for New Castle
County.  On June 15, 1998, the Court of Chancery signed an order which
consolidated the four actions.  Now captioned as In re Stone Container
Shareholders Litigation, C.A. 16375 (the "Action"), the Action alleges,
among other things, that the directors of the Company violated the
fiduciary duties of due care and loyalty that they owed to the public
stockholders of the Company because, the Action contends, the directors
failed to undertake an appropriate evaluation of the Company's net worth
as a merger/acquisition candidate, actively evaluate the proposed
transaction and engage in a meaningful auction with third parties in an
attempt to obtain the best value for the Company's stockholders.  The
Action further alleges that the Company's directors failed to make an
informed decision and that the stockholders will not receive fair value
for their shares of common stock in the Merger, will be largely divested
of their right to share in the Company's future growth and development
and will be prevented from obtaining fair and adequate consideration for
their shares of common stock.  The Action requests that the Court of
Chancery, among other things, declare that the Action is a proper class
action and enjoin the Merger and require that the directors place the
Company up for auction and/or conduct a market-check to ascertain the
Company's value.

     On August 11, 1998, the parties to the Action entered into a
memorandum of understanding setting forth the terms of a proposed
settlement of the Action, subject to certain conditions.  While the
Company, the members of the Company's board of directors and JSC continue
to deny the allegations of the Action or that they have breached any duty
or engaged in any wrongdoing in connection with the Merger, the
defendants have agreed to enter into the proposed settlement to eliminate
the burden, expense and uncertainty of litigation.  In connection with
the proposed settlement, (a) the Company and JSC agreed to provide
plaintiffs' counsel with an opportunity to review and comment upon the
disclosure to be provided to the Company's stockholders in the joint
proxy statement seeking stockholder approval of the Merger, (b) the
Company agreed to obtain an updated opinion as to the fairness of the
Merger to the Company's stockholders from a financial point of view, and
(c) the Company and JSC agreed, subject to approval by their respective
boards of directors, to amend the Merger Agreement to reduce the
termination fee payable to the Company or JSC, respectively, upon
termination of the Merger in certain circumstances, from $60 million to
$50 million.  The defendants in the Action agreed not to oppose an
application to the Court of Chancery by plaintiffs' counsel for fees and
expenses not to exceed $650,000, which would be paid by the Company.  The
proposed settlement set forth in the memorandum of understanding is
subject to a number of conditions, including discovery by plaintiffs'
counsel, approval of the proposed settlement by the Court of Chancery and
consummation of the Merger.  If the proposed settlement is approved by
the Court of Chancery and the other conditions are satisfied, the Court
will certify a non-opt out class of the Company's stockholders for the
period from May 10, 1998 through the effective time of the Merger, the
Action will be dismissed with prejudice and the Company, the Company's
board of directors, JSC and their respective officers, directors,
employees and agents will receive a release for all claims that were or
could have been asserted in the Action.

     Several class action complaints have been filed in each of the
United States District Court for the Northern District of Illinois and
the United States District Court for the Eastern District of
Pennsylvania.  The suits allege that the Company reached agreements in
restraint of trade that affected the manufacture, sale and pricing of
corrugated products, including corrugated sheets and corrugated
containers,  in violation of Section 1 of the Sherman Antitrust Act, 15
U.S.C. 1.  The Company is the only named defendant, though the suits
allege that other unnamed firms participated in the purported restraints
of trade, and some specifically allege, on information and belief, that
Jefferson Smurfit Corporation also participated.  The suits seek an
unspecified amount of damages.  Under the provisions of the antitrust
laws, any award of actual damages would be trebled.   The Company has
moved to dismiss some of the complaints and intends to move to dismiss
the remaining complaints as well.  The Company has moved before the
Judicial Panel for Multidistrict Litigation to have all of the complaints
transferred to and consolidated before the United States District Court
for the Northern District of Illinois.  Discovery has not yet commenced,
and a trial date has not been set.  The Company believes it has
meritorious defenses to these actions, and intends to vigorously defend
itself.

     On June 4, 1998 the Company, believing the allegations to be without
merit and without admitting liability, entered into a consent decree (the
"Consent Agreement") with the Federal Trade Commission (the "FTC").  In
pertinent part, the Consent Agreement requires the Company to cease and
desist from "requesting, suggesting, urging or advocating that any
manufacturer or seller of linerboard raise, fix, or stabilize prices or
price levels." and from "entering into, or attempting to enter into.any
agreement.to fix, raise, establish, maintain or stabilize prices or price
levels..".  There are no monetary fines, sanctions or damages imposed by
the FTC in connection with the Consent Agreement.  However, the Company
will be required to file certain reports on an annual basis with the FTC
to evidence its compliance with the Consent Agreement.

     On October 20, 1998, two holders of the Company's Series E
Cumulative Convertible Exchangeable Preferred Stock (the "Series E
Preferred") filed a complaint against the Company in Delaware Chancery
Court.  The plaintiffs have alleged that the Company is violating its
certificate of incorporation by failing to call a meeting of Series E
Preferred stockholders for the purpose of electing two directors by those
stockholders.  The plaintiffs have also alleged that, in connection with the
pending Merger, the Company is seeking to change the Series E Preferred
stockholders' rights without a two-thirds class vote of the Series E
Preferred stockholders and that such stockholders should be entitled to
vote with respect to the Merger.  Among other things, the plaintiffs have
requested injunctive relief with respect to the Merger.

     On October 29, 1998, a separate complaint by a Series E Preferred
stockholder was filed against the Company in Delaware Chancery Court.
This complaint is similar to the October 20, 1998 complaint; however,
this second complaint purports to constitute a class action on behalf of
all Series E Preferred stockholders and also names each of the directors
of the Company as additional defendants.

     The Company intends to vigorously defend these actions.


              STONE CONTAINER CORPORATION AND SUBSIDIARIES
       ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS
                                    
Results of Operations

Provided below is certain financial data for the three and nine months
ended September 30, 1998 and 1997.

                         Three months ended         Nine months ended
                           September 30,              September 30,
                             1998         1997         1998         1997
Net sales               $ 1,218.2    $ 1,182.8    $ 3,757.4    $ 3,563.9
Depreciation and                                                        
amortization                 67.6         73.9        203.6        233.5
Interest expense            117.4        114.7        354.7        340.9
Equity loss from                                                        
affiliates                   40.3         16.9         76.0         40.1
Loss before income                                                      
taxes,                                                                  
  minority interest         249.1        149.9        545.4        465.1
and
  extraordinary
charges
Net loss                    275.5         98.7        501.2        316.1

The Company incurred a net loss of $275.5 million for the 1998 third
quarter, or $2.66 per share of common stock, as compared with a net loss
for the 1997 third quarter of $98.7 million, or $1.01 per share of common
stock.  For the nine months ended September 30, 1998, the Company
incurred a net loss of $501.2 million, or $5.01 per share of common
stock, as compared with a net loss of $316.1 million, or $3.24 per share
of common stock, for first the nine months of 1997.   The third quarter
results include a $30 million charge to write down the Company's
investment in Venepal SACA and a $19 million charge to write certain
non-core wood products assets to fair value less cost to sell.
The Company had previously incurred a charge of $53.5 million in the
second quarter of 1998 to write-off its interest in Stone Venepal
(Celgar) Pulp, Inc. ("SVCPI").  See also Note 5 to the Consolidated
Financial Statements.  The results for the third quarter and
first nine months of 1998 were also negatively impacted by the
establishment of valuation allowances against deferred tax assets on
net operating loss carryforwards which, due to continued losses, may not
be realizable.  The net loss for the nine months ended September 30, 1997
includes a non-cash extraordinary charge of $13.3 million, or $.13 per
common share, representing the Company's share of a loss from the early
extinguishment of debt incurred by Abitibi-Consolidated Inc. in connection
with the May 1997 merger of Stone-Consolidated Corporation with
Abitibi-Price Inc.

     Net sales for the three and nine months ended September 30, 1998,
increased $35.4 million and $193.5 million, or 3.0% and 5.4%,
respectively over the same periods of 1997.  The increases resulted
primarily from improved selling prices for corrugated containers and
containerboard and increased corrugated container sales volumes, which
more than offset the effect of lower average market pulp selling prices
and sales volume.  Sales for the nine months ended September 1997
included $62 million of sales generated by SVCPI, which had become a non-
consolidated affiliate effective June 26, 1997.  On an ongoing basis
excluding SVCPI  in 1997, sales for the nine months of 1998 increased
7.3%, over the prior year period.  Additionally, the strengthening of the
U.S. dollar relative to the German Mark and Canadian dollar had a
negative affect on sales.  If the U.S. dollar exchange rates remained
unchanged from those of the 1997 periods, net sales for the three and
nine months ended September 30, 1998 would have been higher by
approximately $1 million and $22  million, respectively.

     Cost of products sold decreased as a percent of net sales to 84.1%
and 82.8% for the third quarter and nine months  of 1998, respectively,
from 84.4% and 84.2% in the prior year periods.  These improvements were
mainly due to increased selling prices for most of the Company's products
over prior year levels.  Selling, general and administrative expenses as
percent of sales increased to 12.4% for the current quarter from 11.5%
for the third quarter of 1997.  For the nine months ended September 30,
1998 selling, general and administrative expenses as a percent of sales
remained virtually unchanged from the 1997 period.   Depreciation and
amortization decreased 8.5% and 12.8% from the 1997 third quarter and
nine month period, respectively, due in part to the deconsolidation of
SVCPI and due to the full depreciation of certain assets in the prior
year.  For the third quarter and first nine months of 1998 the Company's
share of losses from equity affiliates increased $23.4 million and $35.9
million over the respective prior year periods, largely as a result of a
significant increase in foreign exchange transaction losses recorded by
certain non-consolidated affiliates.  Additionally, the Company's
earnings were negatively affected by $11.8 million and $20.3 million of
foreign exchange transaction losses included in Other (income) expense
for the three months and nine months ended September 30, 1998 as compared
to $.8 million and $4.4 million of exchange losses recognized in the
comparable prior year periods.  Interest expense was $2.7 million and
$13.8 million higher in the third quarter and nine month period of 1998,
primarily due to increased average borrowings.

   
               Product Line Sales Data               Percentage Change
            Three months      Nine months     Three months      Nine months
                ended            ended           ended             ended
                                              Sales    Sales   Sales    Sales
           1998       1997   1998     1997    Revenue  Volume  Revenue Volume
(in millions)             
Corrugated                                                                      
containers $ 680     $ 609  $2,017    $1,812     11.7%    4.6%    11.3%    5.9%
Paperboard                                                                      
and kraft    270       292     883       834     (7.5)   (15.9)    5.9    (7.1)
paper                                                      
Industrial                                                                      
paper bags   119       117     355       348      1.7      1.0     2.0     1.5
and sacks
Market                                                                       
pulp          47        79     202       316    (40.5)   (11.7)   (36.1)  (24.7)
Other        102        86     300       254     18.6      nm      18.1      nm
Total                                                                        
Net        1,218     1,183   3,757     3,564      3.0               5.4
Sales    
Sales                                                                        
of                                        
SVCPI                                     
(deconsolidated                                   
June 1997)   --         --     --        (62)

Proforma $ 1,218    $1,183   3,757    $3,502      3.0%             7.3%        
sales
excluding SVCPI

nm=not meaningful

     Net sales of corrugated containers increased 11.7% over the third
quarter of 1997 as a result of improved domestic selling prices and a
4.6% increase in sales volume.  Shipments of corrugated containers,
including the Company's proportionate share of the shipments by its
foreign affiliates, were 15.1 billion square feet for the third quarter
of 1998 compared with 14.3 billion square feet for the comparable prior
year period.  For the first nine months of 1998 corrugated container
sales increased 11.3% over the prior year period as a result of improved
domestic  selling prices and a 5.9% increase in sales volume.  Shipments
of corrugated containers were 44.3 billion square feet for the nine
months of 1998 versus 41.4 billion in 1997.

     Net sales of paperboard and kraft paper decreased 7.5% from the
third quarter of 1997 due to a 15.9% decrease in sales volume which more
than offset improved paperboard selling prices.  Production of
containerboard and kraft paper was 1.34 million tons for the three months
ended September 30, 1998, compared to 1.35 million tons for the prior
year period.  Sales of paperboard and kraft paper increased 5.9% over the
first nine months of 1997, despite a 7.1% reduction in sales volume, as a
result of significant price improvements from 1997 levels.  Production of
containerboard and kraft paper was 4.06 million tons for the nine months
ended September 30, 1998, compared to 3.94 million tons for the prior
year period.

     Sales of industrial bags and sacks for the third quarter and first
nine months of 1998 increased modestly over the prior year periods as a
result of improved sales volume and slightly higher average selling
prices.  Shipments of paper bags and sacks, including the Company's
proportionate share of retail bag shipments of S&G Packaging Company,
L.L.C. ("S&G"), were 128 thousand tons and 375 thousand tons for the
three and nine months ended September 30, 1998, compared with 134
thousand tons and 382 thousand tons shipped during the comparable 1997
periods.

     Sales of market pulp decreased $32 million, or 40.5%, from the third
quarter of 1997 due to a significant decrease in selling prices and lower
sales volume.  Sales of market pulp for the first nine months of 1998
decreased $114 million, or 36.1%, from the nine months of 1997.
Excluding $62 million of SVCPI's sales in 1997, market pulp sales
decreased 20.5% from the first nine months of 1997 due to a 7.7% decline
in sales volume and lower average selling prices.

Foreign Currency Risk

A portion of the Company's operations are located outside of the United
States.  Because of this, movements in exchange rates can have an impact
on the Company's financial condition and results of operations.  The
Company's significant foreign exchange exposures are the Canadian dollar
and the German Mark.  In general, a weakening of the German Mark and
Canadian dollar relative to the U.S. dollar has a negative translation
effect on the Company's financial condition and results of operations.
Conversely, a strengthening of these currencies relative to the U.S.
dollar would have the opposite effect.

     During 1998 the average exchange rates for the Canadian dollar and
the German Mark strengthened (weakened) against the U.S. dollar as
follows:

                          Nine         Three
                         months       months
                          ended        ended
                         9-30-98       9-30-98

Canadian dollar            (5.7)%        (4.6) %
German mark                (3.3)%          1.8 %


Financial Condition and Liquidity

The Company's working capital ratio was 1.1 to 1 at September 30, 1998
and 1.5 to 1 at December 31, 1997.  The Company's long-term debt to total
capitalization ratio was 101.7 percent at September 30, 1998 and 88.8
percent at December 31, 1997.  Capitalization, for purposes of this
ratio, includes long-term debt, deferred income taxes, minority interest
and stockholders' equity.

     The Company's primary capital requirements consist of debt service
and capital expenditures, including capital investment for compliance
with certain environmental legislation requirements and ongoing
maintenance expenditures and improvements.  The Company is highly
leveraged, and while highly leveraged, will incur substantial ongoing
interest expense.

     The Company's Credit Agreement contains covenants that include,
among other things, the maintenance of certain financial tests and
ratios.  On March 26, 1998, on June 5, 1998, on July 31, 1998 and on
October 5, 1998, the Company and its lenders amended the Company's credit
agreement to, among other things, modify certain financial covenant
requirements.  At September 30, 1998, the Company's credit agreement, as
amended, provided for four senior secured term loans aggregating $1,001
million which mature through October 1, 2003 and $560 million of senior
secured revolving credit facility commitments maturing May 15, 1999
(collectively, the "Credit Agreement").

     On October 14, 1998, the Credit Agreement lenders approved an
amendment to the Credit Agreement which, among other things, permitted
the Company to sell the Snowflake, Arizona newsprint manufacturing
operations and related assets (including The Apache Railway Company that
services the Snowflake Facility) and further modified the required
indebtedness ratio financial covenant.

In connection with the Merger, the Company expects to enter into an
Amended and Restated Credit Agreement to become effective on the
effective date of the Merger.  Effectiveness of the Amended and Restated
Credit Agreement is subject to consummation of the Merger, as well as
other customary conditions, and therefore no assurance can be given that
it will become effective.  The Amended and Restated Credfit Agreement  
would, among other things,
(i) extend the maturity date of the revolving credit facility to
December 31, 2000, (ii) extend the amortization payment under one of the
term loans due on October 1, 1999 to the new term loan maturity date of
October 1, 2000, (iii) permit the use of net proceeds from the sale of
the newsprint and related assets at the Snowflake, Arizona facility to
repay a portion of the $240 million principal amount of 11-7/8% Senior
Notes due December 1, 1998, (iv) increase the borrowing margins on the
various tranches of the Amended and Restated Credit Agreement by 1/8% to
7/8%, (v) amend the required interest coverage ratio covenant, and
replace the indebtedness ratio covenant with an EBITDA covenant, (vi)
permit the Merger, and (vii) provide additional collateral in the
shares of Stone Container (Canada) Inc. and Stone Finance Company of
Canada by increasing the percentage of outstanding shares pledged of each
of these subsidiaries to 65% from 51%.

     At November 10, 1998, the Company had borrowing availability of
approximately $190 million (net of letters of credit which reduce the
amount available to be borrowed) under its revolving credit facilities.
The weighted average interest rates on outstanding term loan and revolver
borrowings under the Credit Agreement for the nine months ended September
30, 1998 were 9.0 percent and 8.5 percent, respectively.  The weighted
average rates do not include the effect of the amortization of deferred
debt issuance costs.

     The Company's various senior note indentures (the "Senior Notes
Indentures") (under which approximately $2.0 billion of debt is
outstanding) state that if the Company does not maintain a minimum
Subordinated Capital Base (as defined) of $1 billion for any two
successive quarters, then the Company will be required to semi-annually
offer to purchase 10 percent of such outstanding indebtedness at par
until the minimum Subordinated Capital Base is again attained.  In the
event that the Company's Credit Agreement does not permit the offer to
repurchase, then the Company will be required to increase the rates on
the senior notes outstanding under the Senior Note Indentures by 50 basis
points per quarter up to a maximum of 200 basis points until the minimum
Subordinated Capital Base is attained.  The Company's Subordinated
Capital Base was $440.6 million at September 30, 1998, $636.0 million at
June 30, 1998, $840.0 million at March 31, 1998 and $898.6 million at
December 31, 1997.  In April 1998, the Company, as permitted by the March
1998 Credit Agreement amendment, made a one-time offer for the repurchase
of 10 percent of the senior notes issued under the Senior Note
Indentures.  The offer expired on April 28, 1998 with approximately $1.3
million of notes having been tendered and purchased at par.

     The Company's senior subordinated indenture dated March 15, 1992
(the "Senior Subordinated Indenture") (under which approximately $594
million of debt was outstanding at September 30, 1998) states that if the
Company does not maintain $500 million of Net Worth (as defined) for any
two successive quarters, the Company will be required to increase the
interest rate on each series of senior subordinated indebtedness
outstanding under the Senior Subordinated Indenture by 50 basis points on
each succeeding interest payment date up to a maximum amount of 200 basis
points until the required Net Worth is attained.  The Company's Net Worth
(as defined) was $(79.6) million at September 30, 1998, $115.8 million at
June 30, 1998, $319.8 million at March 31, 1998 and $378.4 million at
December 31, 1997.  Effective August 15,1998 the Company increased the
interest rate on its 11 percent Senior Subordinated Debentures due August
15, 1999 by 50 basis points.   The Company increased the interest rate on
its 10.75 percent Senior Subordinated Debentures due April 1, 2002 and on
its Senior Subordinated Units due April 1, 2002 by 50 basis points
effective October 1, 1998.

     There can be no assurance that the Company can achieve or maintain
the minimum Subordinated Capital Base or required Net Worth in the
future.  On the effective date of the Merger, if the Merger is consummated,
pursuant to accounting standards set forth in APB 16, the Company's net
worth would increase by an estimated $2.4 billion which would permit the
Company to meet its minimum Subordinated Capital Base and Net Worth 
requirements under its various indentures.  Additionally, on the
effective date of the Merger, if the Merger is consummated, the Company
expects to receive $300 million as a capital contribution from SSCC which
would also increase the Company's net worth thereby also increasing the
Company's Subordinated Capital Base.

Operating activities:

Net cash used by operating activities was $49.0 million for the nine
months ended September 30, 1998, compared with $191.0 million of cash
used by operating activities for the 1997 period.  The results of
operations for 1998, 1997 and 1996 have had an adverse impact on the
Company's cash flow and liquidity.  As a result, the Company has had to
increase its indebtedness in order to meet cash flow needs.

Financing activities:

During the first nine months of 1998 the Company increased its borrowings
by $386 million under its revolving credit facility, primarily to fund
operating cash needs, capital expenditures and debt service obligations.

     On April 3, 1998, Stone Container GMBH, a German subsidiary of the
Company, entered into a loan facility agreement with Dresdner Bank AG for
90 million Deutsche Marks at an interest rate equal to LIBOR plus 2
percent.  The loan facility expires April 30, 2005.  The proceeds from
the facility were loaned to the Company and were applied against amounts
outstanding on the Company's term loans under its Credit Agreement.

     On June 16, 1998, the Company issued a notice to redeem all of its
outstanding 8-7/8 percent Convertible Senior Subordinated Notes due 2000
(the "Notes") on July 15, 1998 at a redemption price equal to 101 percent
of the principal amount of each Note, plus accrued interest.  The $58.4
million of Notes were convertible into shares of common stock at a
conversion price of $11.55 per share.  All of the Notes were converted in
July (prior to the redemption date), resulting in the issuance of
5,060,516 shares of common stock.

     On July 15, 1998, the Company repaid its 12-5/8 percent Senior Notes
at maturity, with borrowings under its revolving credit facility.

     The declaration of dividends by the Board of Directors is subject
to, among other things, certain restrictive provisions contained in the
Company's Credit Agreement, Senior Note Indentures and Senior
Subordinated Indenture.  Due to these restrictive provisions, the Company
cannot declare or pay dividends on its Series E Cumulative Convertible
Exchangeable Preferred Stock (the "Series E Preferred") or common stock
until the Company generates income or issues capital stock to replenish
the dividend pool under various of its debt instruments and Net Worth (as
defined) equals or exceeds $750 million.  Additionally, common stock cash
dividends cannot be declared and paid in the event accumulated preferred
stock dividend arrearages exist.  At September 30, 1998, the dividend
pool under the Senior Subordinated Indenture (which contains the most
restrictive dividend pool provision) had a deficit of approximately $709
million and Net Worth (as defined) was $(79.6) million.  In the event six
quarterly dividends remain unpaid on the Series E Preferred, the holders
of the Series E Preferred would have the right to elect two members to
the Company's Board of Directors until the accumulated dividends on such
Series E Preferred have been declared and paid or set apart for payment.
At September 30, 1998 the Company had accumulated dividend arrearages on
the Series E Preferred of $12 million, which represents six consecutive
quarters for which dividends have not been paid.

     It is the Company's intention to call a special meeting of the
Series E Preferred stockholders as soon as practicable after the
effective date of the Merger to elect two directors nominated by the
Series E Preferred holders.

Investing activities:

Capital expenditures for the nine months ended September 30, 1998 totaled
approximately $109 million.

Outlook:

The Company's liquidity and financial flexibility has been adversely
impacted by the net losses and insufficient operating cash flows
generated during the past two years and in the first nine months of 1998.

     On October 27, 1997, the Company announced its intent to, among
other things, sell its ownership interest in Stone-Canada which at the
time of sale would have included its 25.2 percent ownership interest in
Abitibi-Consolidated, its 50 percent interest in MacMillan-Bathurst and
its wholly owned pulp mill located at Portage-du-Fort, Quebec.  The
Company still intends to sell its interest in the Abitibi-Consolidated
shares and possibly other Canadian assets which are not as yet
determined.  If completed, this transaction would provide a significant
amount of cash to the Company, which would be used to repay debt.
Additionally, the Company intends to sell or monetize certain other of
its assets (including any remaining pulp operations) with any proceeds
received therefrom to also be applied towards debt reduction.  On May 10,
1998, the Company agreed to merge (the "Merger") with a subsidiary of
Jefferson Smurfit Corporation ("JSC") pursuant to an Agreement and Plan
of Merger dated as of May 10, 1998 among JSC, JSC Acquisition Corporation
and the Company, as amended by Amendment No 1 dated as of October 2, 1998
(the "Merger Agreement").  Due to the proposed Merger, the Company is re-
evaluating the previously announced divestitures.  While the Company
currently intends to sell or otherwise divest certain non-core assets,
the determination of non-core assets to be divested and the timing of any
such transactions will be dependent on, among other things, the
consummation and effective date of the Merger, discussion with management
of JSC, pending planning for integration of divestiture and cost
reduction plans for JSC and the Company post-merger, potential
refinancing plans related to the Merger and market conditions.  While the
Company currently believes that these sales and/or monetizations may be
consummated, subject, among other things, to market conditions and market
values for such assets; no assurance can be given that such asset sales
or monetizations will be completed.  Currently, the Company' debt
agreements require that proceeds from asset sales be used only for debt
reduction.

     On the effective date the Merger, assuming the JSC Amendment is
effective, the Company expects to receive $300 million as a capital
contribution from its new parent company, SSCC.

     The Company's ability to incur additional indebtedness and refinance
its 1998 debt maturities is significantly limited under the Company's
debt agreements.  The Company has debt amortizations of $250 million of
principal plus interest of approximately $130 million due in the
remainder of 1998 and has significant annual debt service requirements
beyond 1998.  The 1998 debt amortizations include $240 million of 11-7/8
percent Senior Notes due December 1, 1998.

     It is expected that the Company will continue to incur losses unless
prices for the Company's products substantially improve.  Without
achieving significant price increases and sustaining such levels in the
future, the Company's cash resources and borrowing availability under the
existing revolving credit facilities will likely be fully utilized,
thereby reducing such sources of liquidity.  Pricing for the Company's
products has not improved significantly over the depressed levels of
1997, and as a result the Company expects to report a net loss for the
fourth quarter of 1998.  The Company's primary capital requirements
consist of debt service and  capital expenditures, including capital
investment for compliance with certain environmental legislation
requirements and ongoing maintenance expenditures and improvements.  The
Company is highly leveraged and as a result incurs substantial ongoing
interest expense.  Besides the 1998 debt service requirements previously
mentioned, the Company, based upon indebtedness outstanding at September
30, 1998, will be required to make debt principal repayments of
approximately $747 million in 1999, $414 million in 2000 and $617 million
in 2001.  In the event that operating cash flows, proceeds from any
assets sales, borrowing availability under its revolving credit
facilities or from other financing sources do not provide sufficient
liquidity for the Company to meet its obligations, including its debt
service requirements, the Company will be required to pursue other
alternatives to repay indebtedness and improve liquidity, including cost
reductions, deferral of certain discretionary capital expenditures and
seeking amendments to its debt agreements.  No assurances can be given
that such measures, if required, could be implemented or would generate
the liquidity required by the Company to operate its business and service
its obligations.

     On May 10, 1998, the Company agreed to the Merger.  The terms of the
Merger are set forth in the Merger Agreement.  In the Merger, each share
of the Company's common stock will be converted into 0.99 of a share of
JSC's common stock, par value $0.01 per share (the "JSC Common Stock"),
and JSC will be renamed Smurfit-Stone Container Corporation.  The Merger
is intended to constitute a tax-free reorganization under the Internal
Revenue Code of 1986, as amended, and will be accounted for as a
purchase.

     The shareholders of the Company and JSC will vote on the Merger on
November 17, 1998.  Subject to shareholder approval, the Merger is
expected to close shortly afterward.

     The foregoing summary of the original Agreement and Plan of Merger
is qualified in its entirety by reference to the text of the original
Agreement and Plan of Merger, a copy of which is filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K dated May 12, 1998 and which is
incorporated herein by reference.  The Merger Agreement (as amended by
Amendment No 1 thereto) is included in the Joint Proxy
Statement/Prospectus dated October 8, 1998 of JSC and the Company.

If the Merger is consummated, Smurfit-Stone Container Corporation
("SSCC") is expected to have approximately $7 billion of debt outstanding
after the Merger on a consolidated basis (without giving effect to any
divestitures after the Merger) and the Company will need to continue to
address its financial condition and liquidity needs.  As described in the
Joint Proxy Statement/Prospectus, JSC intends to amend its existing
credit agreement to borrow $550 million (the "JSC Amendment") and use a
portion of such borrowing to make a $300 million captial contribution to
the Company at the time of the Merger.  There can be no assurance that
the JSC Amendment will become effective.  If the JSC Amendment does not
become effective, there can be no assurances to the extent to which any
alternative financings would be available or the terms of any such
alternative.  Also in connection with the Merger, the Company expects to
amend and restate its Credit Agreement to, among other things, extend
the maturity date of its revolving credit facility and certain term 
loan payments.  See "Financial Condition and Liquidity."  If the Merger
is consummated and the JSC Amendment is effected, it is expected that
the funds from the JSC Amendment, proceeds from divestitures and funds
generated from operations will satisfy the Company's short term liquidity
needs.  The Company does not expect such sources of funds to satisfy
its long term liquidity needs and will needs to obtain additional debt
or equity financing, if available and available on acceptable terms.
A further description of the financial position of the Company and SSCC
following the Merger, if consummated, is set forth in the Joint Proxy
Statement/Prospectus under "Risk Factors - Substantial Leverage; - Ability
to Service Debt/Liquidity; and - Restrictive Covenants/Limited Ability
to Incur Indebtedness."

     In May 1998, four putative class action complaints were filed
against the individual directors of the Company, the Company and JSC in
the Court of Chancery of the State of Delaware in and for New Castle
County.  On June 15, 1998, the Court of Chancery signed an order which
consolidated the four actions.  Now captioned as In re Stone Container
Shareholders Litigation, C.A. 16375 (the "Action"), the Action alleges,
among other things, that the directors of the Company violated the
fiduciary duties of due care and loyalty that they owed to the public
stockholders of the Company because, the Action contends, the directors
failed to undertake an appropriate evaluation of the Company's net worth
as a merger/acquisition candidate, actively evaluate the proposed
transaction and engage in a meaningful auction with third parties in an
attempt to obtain the best value for the Company's stockholders.  The
Action further alleges that the Company's directors failed to make an
informed decision and that the stockholders will not receive fair value
for their shares of common stock in the Merger, will be largely divested
of their right to share in the Company's future growth and development
and will be prevented from obtaining fair and adequate consideration for
their shares of common stock.  The Action requests that the Court of
Chancery, among other things, declare that the Action is a proper class
action and enjoin the Merger and require that the directors place the
Company up for auction and/or conduct a market-check to ascertain the
Company's value.

     On August 11, 1998, the parties to the Action entered into a
memorandum of understanding setting forth the terms of a proposed
settlement of the Action, subject to certain conditions.  While the
Company, the members of the Company's board of directors and JSC continue
to deny the allegations of the Action or that they have breached any duty
or engaged in any wrongdoing in connection with the Merger, the
defendants have agreed to enter into the proposed settlement to eliminate
the burden, expense and uncertainty of litigation.  In connection with
the proposed settlement, (a) the Company and JSC agreed to provide
plaintiffs' counsel with an opportunity to review and comment upon the
disclosure to be provided to the Company's stockholders in the joint
proxy statement seeking stockholder approval of the Merger, (b) the
Company agreed to obtain an updated opinion as to the fairness of the
Merger to the Company's stockholders from a financial point of view, and
(c) the Company and JSC agreed, subject to approval by their respective
boards of directors, to amend the Merger Agreement to reduce the
termination fee payable to the Company or JSC, respectively, upon
termination of the Merger in certain circumstances, from $60 million to
$50 million.  The defendants in the Action agreed not to oppose an
application to the Court of Chancery by plaintiffs' counsel for fees and
expenses not to exceed $650,000, which would be paid by the Company.  The
proposed settlement set forth in the memorandum of understanding is
subject to a number of conditions, including discovery by plaintiffs'
counsel, approval of the proposed settlement by the Court of Chancery and
consummation of the Merger.  If the proposed settlement is approved by
the Court of Chancery and the other conditions are satisfied, the Court
will certify a non-opt out class of the Company's stockholders for the
period from May 10, 1998 through the effective time of the Merger, the
Action will be dismissed with prejudice and the Company, the Company's
board of directors, JSC and their respective officers, directors,
employees and agents will receive a release for all claims that were or
could have been asserted in the Action.

     On October 20, 1998, two holders of the Series E Preferred filed a
complaint against the Company in Delaware Chancery Court.  The plaintiffs
have alleged that the Company is violating its certificate of incorporation
by failing to call a meeting of Series E Preferred stockholders for the
purpose of electing two directors by those stockholders.  The plaintiffs
have also alleged that, in connection with the pending Merger, the Company is
seeking to change the Series E Preferred stockholders' rights without a
two-thirds class vote of the Series E Preferred stockholders and that
such stockholders should be entitled to vote with respect to the Merger.
Among other things, the plaintiffs have requested injunctive relief with
respect to the Merger.

     On October 29, 1998, a separate complaint by a Series E Preferred
stockholder was filed against the Company in Delaware Chancery Court.
This complaint is similar to the October 20, 1998 complaint; however,
this second complaint purports to constitute a class action on behalf of
all Series E Preferred stockholders and also names each of the directors
of the Company as additional defendants.

     The Company intends to vigorously defend these actions.



                       PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings

     On April 6, 1998, a suit was filed against the Company in Los
     Angeles Superior Court by Chesterfield Investments and DP
     Investments L.P. (the "Plaintiffs") alleging that the Company owes
     them approximately $120 million relating to the Company's purchase
     of the Plaintiffs' interest in Stone Savannah River Pulp & Paper
     Corporation ("SSR").  In 1991, the Company purchased from
     Chesterfield Investments its shares of common stock of SSR for
     approximately $6 million plus a contingent payment payable in March
     1998 based upon the performance of the operations that were
     contained in SSR.  The Company is vigorously disputing the
     Plaintiffs' calculation of the contingent payment amount.  The
     Company has settled the portion of the suit relating to amounts owed
     to DP Investment L.P.

     Several class action complaints have been filed in each of the
     United States District Court for the Northern District of Illinois
     and the United States District Court for the Eastern District of
     Pennsylvania.  The suits allege that the Company reached agreements
     in restraint of trade that affected the manufacture, sale and
     pricing of corrugated products, including corrugated sheets and
     corrugated containers,  in violation of Section 1 of the Sherman
     Antitrust Act, 15 U.S.C. 1.  The Company is the only named
     defendant, though the suits allege that other unnamed firms
     participated in the purported restraints of trade, and some
     specifically allege, on information and belief, that Jefferson
     Smurfit Corporation also participated.  The suits seek an
     unspecified amount of damages.  Under the provisions of the
     antitrust laws, any award of actual damages would be trebled.   The
     Company has moved to dismiss some of the complaints and intends to
     move to dismiss the remaining complaints as well.  The Company has
     moved before the Judicial Panel for Multidistrict Litigation to have
     all of the complaints transferred to and consolidated before the
     United States District Court for the Northern District of Illinois.
     Discovery has not yet commenced, and a trial date has not been set.
     The Company believes it has meritorious defenses to these actions,
     and intends to vigorously defend itself.

     On October 20, 1998, two holders of the Company's Series E
     Cumulative Convertible Exchangeable Preferred Stock (the "Series E
     Preferred") filed a complaint against the Company in Delaware
     Chancery Court.  The plaintiffs have alleged that the Company is
     violating its certificate of incorporation by failing to call a
     meeting of Series E Preferred stockholders for the purpose of electing
     two directors by those stockholders.  The plaintiffs have also alleged
     that, in connection with the pending Merger, the Company is seeking to
     change the Series E Preferred stockholders' rights without a two-
     thirds class vote of the Series E Preferred stockholders and that
     such stockholders should be entitled to vote with respect to the
     Merger.  Among other things, the plaintiffs have requested injunctive
     relief with respect to the Merger.

     On October 29, 1998, a separate complaint by a Series E Preferred
     stockholder was filed against the Company in Delaware Chancery
     Court.  This complaint is similar to the October 20, 1998 complaint;
     however, this second complaint purports to constitute a class action
     on behalf of all Series E Preferred stockholders and also names each
     of the directors of the Company as additional defendants.

     The Company intends to vigorously defend these actions.


Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits
     4.1  Fifth Amendment of Credit Agreement dated as of October 5, 1998
          between Stone Container Corporation with the financial parties
          signatory thereto and Bankers Trust Company, as agent.

     11.  Computation of Basic and Diluted Net Loss Per Common Share.

     27.  Financial Data Schedule for the nine months ended September 30, 1998
   
     99.  Certain Risk Factors from pages 15-18 of the Joint Proxy
        		Statement/Propectus dated October 8, 1998 of Jefferson
		        Smurfit Corporation and Stone Container Corporation.

(b)  Reports on Form 8-K

     1.   A Report on Form 8-K dated October 21, 1998 was filed under Item 5 -
          Other Events and Item 7 - Exhibits.
     2.   A Report on Form 8-K dated November 4, 1998 was filed under Item 5 -
          Other Events and Item 7 - Exhibits


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


                                              STONE CONTAINER CORPORATION
                                                                         
                                                                         
                                                By:  THOMAS P. CUTILLETTA
                                            Thomas P. Cutilletta
                                             Senior Vice President,
                                             Administration and
                                             Corporation
                                             Controller (Principal
                                             Accounting
                                             Officer)



Date:  November 16, 1998