<PAGE>

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

               UNITED STATES 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 March 31, 2001
                                                --------------

                                      OR

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


                       Commission File Number:  1-10982
                                                -------


                          Cross Timbers Royalty Trust
            (Exact name of registrant as specified in its charter)


                    Texas                                        75-6415930
       -------------------------------                       -------------------
       (State or other jurisdiction of                        (I.R.S. Employer
        incorporation or organization)                       Identification No.)

Bank of America, N.A., P.O. Box 830650, Dallas, Texas             75283-0650
-----------------------------------------------------             ----------
    (Address of principal executive offices)                      (Zip Code)

                                (877) 228-5084
             ----------------------------------------------------
             (Registrant's telephone number, including area code)

                                     NONE
             ----------------------------------------------------
             (Former name, former address and former fiscal year,
                         if change since last report)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes  X   No
                                       ---     ---

Indicate the number of units of beneficial interest outstanding, as of the
latest practicable date:

                         Outstanding as of May 1, 2001
                         -----------------------------
                                   6,000,000

================================================================================
<PAGE>

CROSS TIMBERS ROYALTY TRUST

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
-------------------------------------------------------


          TABLE OF CONTENTS



                                                                            Page
                                                                            ----

          Glossary of Terms................................................   3


PART I.   FINANCIAL INFORMATION

  Item 1. Financial Statements.............................................   4

          Report of Independent Public Accountants.........................   5

          Condensed Statements of Assets, Liabilities and Trust Corpus
            at March 31, 2001 and December 31, 2000........................   6

          Condensed Statements of Distributable Income
            for the Three Months Ended March 31, 2001 and 2000.............   7

          Condensed Statements of Changes in Trust Corpus
            for the Three Months Ended March 31, 2001 and 2000.............   8

          Notes to Condensed Financial Statements..........................   9

  Item 2. Trustee's Discussion and Analysis................................  11

  Item 3. Quantitative and Qualitative Disclosures about Market Risk.......  14


PART II.  OTHER INFORMATION

  Item 6. Exhibits and Reports on Form 8-K.................................  15

          Signatures.......................................................  16

                                                                               2
<PAGE>

CROSS TIMBERS ROYALTY TRUST

GLOSSARY OF TERMS
-----------------


The following are definitions of significant terms used in this Form 10-Q:

Bbl                      Barrel (of oil)

Bcf                      Billion cubic feet (of natural gas)

Mcf                      Thousand cubic feet (of natural gas)

MMBtu                    One million British Thermal Units, a common energy
                         measurement

net profits interest     An interest in an oil and gas property measured by net
                         profits from the sale of production, rather than a
                         specific portion of production. The following are
                         defined net profits interests that were conveyed from
                         the underlying properties to the trust:

                         90% net profits interests - interests that entitle the
                         trust to receive 90% of the net proceeds from the
                         underlying properties that are royalty and overriding
                         royalty interests in Texas, Oklahoma and New Mexico

                         75% net profits interests - interests that entitle the
                         trust to receive 75% of the net proceeds from the
                         underlying properties that are working interests in
                         Texas and Oklahoma

net proceeds             Gross proceeds from sale of production from the
                         underlying properties, less applicable costs

royalty income           Net proceeds multiplied by the applicable net profits
                         percentage of 75% or 90% and paid to the trust

royalty interest         A nonoperating interest in an oil and gas property that
(and overriding          provides the owner a specified share of production
royalty interest)        without any production or development costs

underlying properties    Cross Timbers Oil's interest in certain oil and gas
                         properties from which the net profits interests were
                         conveyed. The underlying properties include royalty and
                         overriding royalty interests in producing and non-
                         producing properties in Texas, Oklahoma and New Mexico,
                         and working interests in producing properties located
                         in Texas and Oklahoma.

working interest         An operating interest in an oil and gas property that
                         provides the owner a specified share of production that
                         is subject to all production and development costs

                                                                               3
<PAGE>

CROSS TIMBERS ROYALTY TRUST

PART I - FINANCIAL INFORMATION
------------------------------


Item 1.   Financial Statements.

The condensed financial statements included herein are presented, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in annual
financial statements have been condensed or omitted pursuant to such rules and
regulations, although the trustee believes that the disclosures are adequate to
make the information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the trust's latest annual report on Form 10-K. In the
opinion of the trustee, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the assets, liabilities and trust
corpus of the Cross Timbers Royalty Trust at March 31, 2001, and the
distributable income and changes in trust corpus for the three-month periods
ended March 31, 2001 and 2000, have been included. Distributable income for such
interim periods is not necessarily indicative of distributable income for the
full year.

                                                                               4
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


Bank of America, N.A., as Trustee
  for the Cross Timbers Royalty Trust:

We have reviewed the accompanying condensed statement of assets, liabilities and
trust corpus of the Cross Timbers Royalty Trust as of March 31, 2001 and the
related condensed statements of distributable income and changes in trust corpus
for the three-month periods ended March 31, 2001 and 2000. These financial
statements are the responsibility of the trustee.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
auditing standards generally accepted in the United States, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.

The accompanying condensed financial statements are prepared on a modified cash
basis as described in Note 1 which is a comprehensive basis of accounting other
than accounting principles generally accepted in the United States.

Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with the basis of accounting described in Note 1.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the statement of assets, liabilities and trust
corpus of the Cross Timbers Royalty Trust as of December 31, 2000 included in
the trust's 2000 annual report on Form 10-K, and in our report dated March 22,
2001, we expressed an unqualified opinion on that statement. In our opinion, the
information set forth in the accompanying condensed statement of assets,
liabilities and trust corpus as of December 31, 2000 is fairly stated in all
material respects in relation to the statement of assets, liabilities and trust
corpus included in the trust's 2000 annual report on Form 10-K from which it has
been derived.



ARTHUR ANDERSEN LLP

Fort Worth, Texas
May 2, 2001

                                                                               5
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CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------

Condensed Statements of Assets, Liabilities and Trust Corpus

<TABLE>
<CAPTION>


                                                          March 31,   December 31,
                                                            2001          2000
                                                         -----------  ------------
                                                         (Unaudited)

<S>                                                      <C>          <C>
ASSETS

Cash and short-term investments........................  $ 1,651,214   $ 1,048,031

Interest to be received................................        2,524         3,307

Net profits interests in oil and gas properties - net..   30,246,883    30,755,456
                                                         -----------  ------------

                                                         $31,900,621   $31,806,794
                                                         ===========  ============


LIABILITIES AND TRUST CORPUS

Distribution payable to unitholders....................  $ 1,653,738   $ 1,051,338

Trust corpus (6,000,000 units of beneficial
  interest authorized and outstanding).................   30,246,883    30,755,456
                                                         -----------  ------------

                                                         $31,900,621   $31,806,794
                                                         ===========  ============

</TABLE>



       The accompanying notes to condensed financial statements are an
                      integral part of these statements.

                                                                               6
<PAGE>

CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------

Condensed Statements of Distributable Income (Unaudited)

<TABLE>
<CAPTION>


                                                    Three Months Ended
                                                          March 31
                                                   ----------------------
                                                      2001        2000
                                                   ----------  ----------

<S>                                                <C>         <C>
Royalty income...................................  $4,107,459  $2,352,880

Interest income..................................       7,036       3,949
                                                   ----------  ----------

Total income.....................................   4,114,495   2,356,829

Administration expense...........................      65,593      56,033
                                                   ----------  ----------

Distributable income.............................  $4,048,902  $2,300,796
                                                   ==========  ==========

Distributable income per unit (6,000,000 units)..  $ 0.674817  $ 0.383466
                                                   ==========  ==========

</TABLE>



       The accompanying notes to condensed financial statements are an
                      integral part of these statements.

                                                                               7
<PAGE>

CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------

Condensed Statements of Changes in Trust Corpus (Unaudited)

<TABLE>
<CAPTION>


                                            Three Months Ended
                                                 March 31
                                         --------------------------
                                             2001          2000
                                         -----------   -----------

<S>                                      <C>           <C>
Trust corpus, beginning of period......  $30,755,456   $33,005,334

Amortization of net profits interests..     (508,573)     (497,738)

Distributable income...................    4,048,902     2,300,796

Distributions declared.................   (4,048,902)   (2,300,796)
                                         -----------   -----------

Trust corpus, end of period............  $30,246,883   $32,507,596
                                         ===========   ===========

</TABLE>


       The accompanying notes to condensed financial statements are an
                      integral part of these statements.

                                                                               8
<PAGE>

CROSS TIMBERS ROYALTY TRUST
--------------------------------------------------------------------------------

Notes to Condensed Financial Statements (Unaudited)


1.   Basis of Accounting

     The financial statements of the Cross Timbers Royalty Trust are prepared on
     the following basis:

     -  Royalty income recorded for a month is the amount computed and paid by
        the interest owner, Cross Timbers Oil Company, to Bank of America, N.A.,
        as trustee for the trust. Royalty income consists of net proceeds
        received by Cross Timbers Oil from the underlying properties in the
        prior month, multiplied by net profit percentages of 90% for the 90% net
        profits interests, and 75% for the 75% net profits interests.

        Costs deducted in the calculation of net proceeds for the 90% net
        profits interests generally include applicable taxes, transportation,
        marketing and legal costs, and do not include other production and
        development costs. For the 75% net profits interests, costs deducted in
        the calculation of net proceeds include production expenses, development
        costs, applicable taxes, operating charges and other costs.

     -  Royalty income is computed separately for each of five conveyances under
        which the net profits interests were conveyed to the trust. If monthly
        costs exceed revenues for any conveyance, such excess costs cannot
        reduce royalty income from other conveyances, but are carried forward
        with accrued interest to be recovered from future net proceeds of that
        conveyance. See Note 3.

     -  Interest income, interest to be received and distribution payable to
        unitholders include interest to be earned from the monthly record date
        (last business day of the month) through the date of the next
        distribution to unitholders.

     -  Trust expenses are recorded based on liabilities paid and cash reserves
        established by the trustee for liabilities and contingencies.

     -  Distributions to unitholders are recorded when declared by the trustee.

     The financial statements of the trust differ from financial statements
     prepared in accordance with generally accepted accounting principles
     ("GAAP") because revenues are not accrued in the month of production,
     expenses are recognized when paid rather than when incurred, and certain
     cash reserves may be established for contingencies which would not be
     accrued under GAAP.

     The initial carrying value of the net profits interests of $61,100,449
     represents Cross Timbers Oil's historical net book value on February 12,
     1991, the creation date of the trust. Amortization of the net profits
     interests is calculated on a unit-of-production basis and is charged
     directly to trust corpus. Accumulated amortization was $30,853,566 as of
     March 31, 2001 and $30,344,993 as of December 31, 2000.

                                                                               9
<PAGE>

2.   Coal Seam Tax Credit

     Cross Timbers Oil has advised the trustee that the trust receives royalty
     income from coal seam gas wells. Production from coal seam gas wells
     drilled after December 31, 1979, and prior to January 1, 1993, qualifies
     for the federal income tax credit for producing nonconventional fuels under
     Section 29 of the Internal Revenue Code. This tax credit, which was
     approximately $1.06 per MMBtu of gas produced from qualifying wells for
     2000, is recalculated annually based on each year's qualified production
     through the year 2002. Such credit, based on the unitholder's pro rata
     share of qualifying production, may not reduce the unitholder's regular tax
     liability (after the foreign tax credit and certain other nonrefundable
     credits) below his tentative minimum tax. Any part of the Section 29 credit
     not allowed for the tax year solely because of this limitation is subject
     to certain carryover provisions. Unitholders should consult their tax
     advisors regarding use of this credit and other trust tax compliance
     matters.

     Based on 2001 qualifying sales volumes and the factors used in the
     calculation of the 2000 coal seam tax credit, the credit is estimated to be
     $0.024 per unit for the quarter ended March 31, 2001. The actual coal seam
     tax credit was $0.032 per unit for first quarter 2000. Final 2001 coal seam
     tax credit data will be provided to unitholders with year-end tax
     information.


3.   Excess Costs

     During the three months ended March 31, 2000, $236,633 ($177,475 net to the
     trust) of excess costs were recovered. As of March 31, 2000, there were
     cumulative excess costs of $145,871 ($109,403 net to the trust) which were
     fully recovered in April 2000. There have been no excess costs in 2001.


                                                                              10
<PAGE>

Item 2.   Trustee's Discussion and Analysis.

The following discussion should be read in conjunction with the trustee's
discussion and analysis contained in the trust's 2000 annual report, as well as
the condensed financial statements and notes thereto included in this quarterly
report on Form 10-Q.

Distributable Income

For the quarter ended March 31, 2001, royalty income was $4,107,459 compared to
$2,352,880 for the first quarter of 2000. This 75% increase in royalty income is
the result of higher oil and gas prices. See "Royalty Income" below.

After considering interest income of $7,036 and administration expense of
$65,593, distributable income for the quarter ended March 31, 2001 was
$4,048,902, or $0.674817 per unit of beneficial interest. For the quarter ended
March 31, 2000, distributable income was $2,300,796, or $0.383466 per unit.
Distributions to unitholders for the quarter ended March 31, 2001 were:

<TABLE>
<CAPTION>

                                                       Distribution
                  Record Date         Payment Date       per Unit
               -----------------    -----------------  ------------
<S>                                 <C>                <C>

               January 31, 2001     February 14, 2001     $0.209289
               February 28, 2001    March 14, 2001         0.189905
               March 30, 2001       April 13, 2001         0.275623
                                                          ---------

                                                          $0.674817
                                                          =========
</TABLE>

Royalty Income

Royalty income is recorded when received by the trust, which is the month
following receipt by Cross Timbers Oil, and generally two months after oil
production and three months after gas production. Royalty income is generally
affected by three major factors:

     -  oil and gas sales volumes,

     -  oil and gas sales prices, and

     -  costs deducted in the calculation of royalty income.

Because properties underlying the 90% net profits interests are royalty and
overriding royalty interests, they generally bear no costs other than production
and property taxes, related legal costs, and marketing and transportation
charges. In addition to these costs, the 75% net profits interests are subject
to production and development costs, since the properties underlying the 75% net
profits interests are working interests.

                                                                              11
<PAGE>

The following is a summary of the calculation of royalty income received by the
trust:

<TABLE>
<CAPTION>
                                                               Three Months
                                                             Ended March 31 (a)
                                                          -----------------------      Increase
                                                             2001         2000         (Decrease)
                                                          ----------   ----------      ----------
<S>                                                       <C>          <C>             <C>
Sales Volumes
Oil (Bbls) (b)
  Underlying properties................................       82,869       88,459          (6%)
  Average per day......................................          901          962          (6%)
  Net profits interests................................       41,591       35,448          17%

Gas (Mcf) (b)
  Underlying properties................................      663,188      796,014         (17%)
  Average per day......................................        7,209        8,652         (17%)
  Net profits interests................................      574,709      686,565         (16%)

Average Sales Prices
 Oil (per Bbl).........................................       $28.73       $24.20          19%
  Gas (per Mcf)........................................        $6.11        $2.72         125%

Revenues
  Oil sales............................................   $2,381,067   $2,140,997          11%
  Gas sales............................................    4,049,705    2,167,742          87%
                                                          ----------   ----------
  Total Revenues.......................................    6,430,772    4,308,739          49%
                                                          ----------   ----------

Costs
 Taxes, transportation
   and other...........................................      843,541      578,305          46%
  Production expense (c)...............................      711,220      593,490          20%
  Development costs....................................      162,807      213,896         (24%)
  Recovery of excess costs and accrued interest........            -      236,633           -
                                                          ----------   ----------
  Total Costs..........................................    1,717,568    1,622,324           6%
                                                          ----------   ----------

Net Proceeds...........................................   $4,713,204   $2,686,415          75%
                                                          ==========   ==========

Royalty Income.........................................   $4,107,459   $2,352,880          75%
                                                          ==========   ==========
</TABLE>

---------------
(a) Because of the interval between time of production and receipt of royalty
    income by the trust, oil and gas sales for the quarter ended March 31
    generally represent oil production for the period November through January
    and gas production for the period October through December.

(b) Oil and gas sales volumes are allocated to the net profits interests based
    upon a formula that considers oil and gas prices and the total amount of
    production expenses and development costs. Changes in any of these factors
    may result in disproportionate fluctuations in volumes allocated to the net
    profits interests. Therefore, comparative discussion of oil and gas sales
    volumes is based on the underlying properties.

(c) Includes an overhead fee which is deducted and retained by Cross Timbers
    Oil. This fee is currently $22,570 per month and is subject to adjustment
    each May based on an oil and gas industry index.

                                                                              12
<PAGE>

The following are explanations of significant variances:

Sales Volumes

During first quarter 2001, oil sales volumes declined 6% and gas sales volumes
declined 17% as compared with the prior year quarter. Lower sales volumes are
primarily because of the timing of cash receipts and natural decline in
production. Most of the decline in gas production was related to New Mexico coal
seam wells.

Sales Prices

Oil

The average oil price for first quarter 2001 was $28.73 per Bbl, an increase of
19% from the first quarter 2000 price of $24.20 per Bbl. During 2000, West Texas
Intermediate ("WTI") posted prices fluctuated between a low of $21.50 per Bbl in
January to a high of $34.25 in September, as increased demand buoyed prices.
Lagging demand in 2001, caused by a worldwide economic slowdown, has caused oil
prices to decline. OPEC members agreed to cut production by one million barrels
per day effective April 1 to stem declining prices. The average WTI posted price
for February through April 2001 was $25.14. Recent trust oil prices have
averaged approximately $0.70 higher than the WTI posted price.

Gas

Gas prices for first quarter 2001 averaged $6.11 per Mcf, or 125% higher than
the first quarter 2000 price of $2.72. After declining briefly at the end of
1999, gas prices strengthened in 2000, reaching a record high of $10.10 per
MMBtu in December 2000 as winter demand strained gas supplies. Gas prices are
expected to remain at higher levels in 2001 because of sustained demand related
to an extended heating season, electrical power generation requirements and
lower gas storage levels. The average NYMEX price for January through March
2001 was $6.27 per MMBtu. At May 1, 2001, the average NYMEX price for the
following twelve months was $4.86 per MMBtu. Recent trust gas prices have
averaged approximately $0.40 higher than the NYMEX price.

Costs

Taxes

Taxes, transportation and other for the quarter were $843,541, 46% higher than
first quarter 2000, primarily because of higher production taxes related to
increased oil and gas revenues.

Production Expenses

Production expenses for the first quarter 2001 were $711,220, 20% higher than
first quarter 2000, primarily because of the timing of maintenance projects.

                                                                              13
<PAGE>

Development

Development costs for the quarter were $162,807, a 24% decline from the prior
year quarter. Lower development costs are related to decreased workover activity
on one of the underlying Texas working interest properties, as well as timing of
payments.

Excess Costs

During first quarter 2000, excess costs and accrued interest for the Texas 75%
net profits interests totaling $236,633 ($177,475 net to the trust) were
recovered. Excess costs and accrued interest were fully recovered in April 2000.


Forward-Looking Statements

This report on Form 10-Q includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements other
than statements of historical fact included in this Form 10-Q including, without
limitation, statements regarding the net profits interests, underlying
properties and industry and market conditions, are forward-looking statements
that are subject to risks and uncertainties which are detailed in the trust's
annual report on Form 10-K for the year ended December 31, 2000, which is
incorporated by this reference as though fully set forth herein. Although Cross
Timbers Oil believes that the expectations reflected in such forward-looking
statements are reasonable, neither Cross Timbers Oil nor the trustee can give
any assurance that such expectations will prove to be correct.


Item. 3   Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in the trust's market risks, as disclosed in
the trust's Form 10-K for the year ended December 31, 2000.

                                                                              14
<PAGE>

PART II - OTHER INFORMATION
---------------------------

Items 1 through 5. Not Applicable.

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

(a)  Exhibits.

          Exhibit Number
          and Description                                          Page
          ---------------                                          ----

          (15) Awareness letter of Arthur Andersen LLP              17

(b)  Reports on Form 8-K.

     No reports on Form 8-K have been filed during the quarter for which this
     report is filed.

                                                                              15
<PAGE>

                                  SIGNATURES

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


                                  CROSS TIMBERS ROYALTY TRUST
                                  By BANK OF AMERICA, N.A., TRUSTEE


                                 By          RON E. HOOPER
                                    ------------------------------
                                             Ron E. Hooper
                                        Senior Vice President



                                  CROSS TIMBERS OIL COMPANY



Date: May 10, 2001                By       LOUIS G. BALDWIN
                                    ------------------------------
                                           Louis G. Baldwin
                                       Executive Vice President
                                      and Chief Financial Officer

                                                                              16