<PAGE>
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

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

                For the quarterly period ended September 30, 2000

                                       OR

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

            For the transition period from ___________ to ___________

                         Commission file number 2-81033
                                                -------


           Winthrop Residential Associates III, A Limited Partnership
           ----------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

               Maryland                                 04-2782016
---------------------------------------     ------------------------------------
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
       incorporation or organization)


 Five Cambridge Center, Cambridge, MA                    02142-1493
---------------------------------------     ------------------------------------
(Address of principal executive office)                  (Zip Code)


Registrant's telephone number, including area code  (617) 234-3000
                                                    --------------


Indicate by check mark whether 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 [ ]

                                     1 of 12
<PAGE>
           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                         FORM 10-QSB SEPTEMBER 30, 2000
                         ------------------------------

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



ITEM 1.  FINANCIAL STATEMENTS.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                   SEPTEMBER 30,        DECEMBER 31,
(IN THOUSANDS, EXCEPT UNIT DATA)                                       2000                 1999
                                                                 -----------------    -----------------
<S>                                                              <C>                  <C>
Assets
------

Cash and cash equivalents                                        $          2,821     $          2,683
Other assets                                                                  122                   91
Real estate (net of accumulated depreciation
      of $3,214 in 2000 and $3,073 in 1999)                                 2,023                2,055
                                                                 -----------------    -----------------

      Total Assets                                               $          4,966     $          4,829
                                                                 =================    =================


Liabilities and Partners' Capital
---------------------------------

Liabilities:

Accounts payable and accrued expenses                            $            105     $             82
Distributions payable                                                          54                  502
Mortgage payable                                                            2,429                2,475
Accrued interest - Subordinated Loan Payable                                   83                   73
Subordinated Loan Payable                                                     133                  133
                                                                 -----------------    -----------------

      Total Liabilities                                                     2,804                3,265
                                                                 -----------------    -----------------

Partners' Capital:

Limited Partners -

   Units of Limited Partnership Interest,
   $1,000 stated value per unit; 25,005 units authorized,
   issued and outstanding                                                   3,343                2,790
General Partners' deficit                                                  (1,181)              (1,226)
                                                                 -----------------    -----------------

         Total Partners' Capital                                            2,162                1,564
                                                                 -----------------    -----------------

         Total Liabilities and Partners' Capital                 $          4,966     $          4,829
                                                                 =================    =================
</TABLE>

                 See notes to consolidated financial statements.

                                     2 of 12
<PAGE>
        WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
        ----------------------------------------------------------
                 FORM 10-QSB SEPTEMBER 30, 2000
                 ------------------------------



CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(IN THOUSANDS, EXCEPT UNIT DATA)

<TABLE>
<CAPTION>
                                                                     FOR THE THREE MONTHS ENDED          FOR THE NINE MONTHS ENDED
                                                                  SEPTEMBER 30,     SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,
                                                                     2000               1999             2000              1999
                                                                ----------------   ----------------  --------------   --------------
<S>                                                             <C>                <C>                <C>             <C>
Income:

    Rental income                                               $           298    $           278    $        880    $         843
    Income from Local Limited Partnership cash distributions                  -              1,017             576            1,321
    Equity in loss of Local Limited Partnership                               -                (15)              -              (47)
    Interest                                                                 30                 20              89               52
    Other                                                                    14                 10              36               37
                                                                ----------------   ----------------  --------------   --------------
      Total Income                                                          342              1,310           1,581            2,206
                                                                ----------------   ----------------  --------------   --------------

Expenses:

    Operating                                                               187                182             541              567
    Interest                                                                 49                 50             148              151
    Depreciation and amortization                                            47                 45             141              136
    General and administrative                                               24                 26              72               63
                                                                ----------------   ----------------  --------------   --------------

      Total Expenses                                                        307                303             902              917
                                                                ----------------   ----------------  --------------   --------------

Net income                                                      $            35    $         1,007    $        679    $       1,289
                                                                ================   ================  ==============   ==============

Net income allocated to General Partners                        $             3    $            76    $         51    $          97
                                                                ================   ================  ==============   ==============

Net income allocated to Limited Partners                        $            32    $           931    $        628    $       1,192
                                                                ================   ================  ==============   ==============

Net income per Unit of Limited Partnership Interest             $          1.28    $         37.23    $      25.11    $       47.67
                                                                ================   ================  ==============   ==============

Distributions per Unit of Limited Partnership Interest          $          1.00    $          1.00    $       3.00    $        3.00
                                                                ================   ================  ==============   ==============
</TABLE>


                 See notes to consolidated financial statements.

                                    3 of 12
<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                         FORM 10-QSB SEPTEMBER 30, 2000
                         ------------------------------

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED)

<TABLE>
<CAPTION>


(IN THOUSANDS, EXCEPT UNIT DATA)                  UNITS OF
                                                  LIMITED            GENERAL             LIMITED                 TOTAL
                                                PARTNERSHIP         PARTNERS'            PARTNERS'              PARTNERS'
                                                  INTEREST           DEFICIT              CAPITAL                CAPITAL
                                              ------------        ------------           -----------            -----------
<S>                                           <C>                 <C>                    <C>                    <C>
Balance - January 1, 2000                           25,005        $     (1,226)          $     2,790            $     1,564

    Net income                                                              51                   628                    679

    Distributions                                                           (6)                  (75)                   (81)
                                              ------------        ------------           -----------            -----------

Balance - September 30, 2000                        25,005        $     (1,181)          $     3,343            $     2,162
                                              ============        ============           ===========            ===========
</TABLE>





                 See notes to consolidated financial statements.

                                     4 of 12
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                         FORM 10-QSB SEPTEMBER 30, 2000
                         ------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      FOR THE NINE MONTHS ENDED
                                                                                 SEPTEMBER 30,        SEPTEMBER 30,
(IN THOUSANDS)                                                                       2000                   1999
                                                                                -----------------    -----------------
<S>                                                                             <C>                  <C>
Cash Flows from Operating Activities:

Net income                                                                      $            679     $          1,289
Adjustments to reconcile net income to net cash
  provided by operating activities:
      Depreciation                                                                           141                  133
      Amortization                                                                             -                    3
      Equity in loss of Local Limited Partnership                                              -                   47
      Income from Local Limited Partnership Cash Distribution                               (576)              (1,321)

      Changes in assets and liabilities:
         Increase in other assets                                                            (31)                 (53)
         Increase (decrease) in accounts payable
            and accrued expenses                                                              23                  (22)
         Increase in accrued interest payable on subordinated loan                            10                   10
                                                                                -----------------    -----------------

      Net cash provided by operating activities                                              246                   86
                                                                                -----------------    -----------------

Cash Flows From Investing Activities:

      Distributions received from Local Limited Partnerships                                 576                1,348
      Property Improvements                                                                 (109)                   -
                                                                                -----------------    -----------------

      Cash provided by investing activities                                                  467                1,348
                                                                                -----------------    -----------------

Cash Flows From Financing Activities:

      Mortgage principal payments                                                            (46)                 (43)
      Distributions to partners                                                             (529)                (331)
                                                                                -----------------    -----------------

      Cash used in financing activities                                                     (575)                (374)
                                                                                -----------------    -----------------

Net increase in cash and cash equivalents                                                    138                1,060

Cash and cash equivalents, beginning of period                                             2,683                1,723
                                                                                -----------------    -----------------

Cash and cash equivalents, end of period                                        $          2,821     $          2,783
                                                                                =================    =================

Supplemental Disclosure of Cash Flow Information
      Interest paid in cash                                                     $            138     $            141
                                                                                =================    =================

Supplemental Disclosure of Non-Cash
      Investing Activities

      Accrued Distributions to Partners                                         $             54     $             27
                                                                                =================    =================
</TABLE>



                 See notes to consolidated financial statements.

                                     5 of 12
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                         FORM 10-QSB SEPTEMBER 30, 2000
                         ------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

1.   GENERAL

     The accompanying financial statements, footnotes and discussions should be
     read in conjunction with the financial statements, related footnotes and
     discussions contained in the Partnership's Annual Report on Form 10-KSB for
     the year ended December 31, 1999.

     The financial information contained herein is unaudited. In the opinion of
     management, all adjustments necessary for a fair presentation of such
     financial information have been included. All adjustments are of a normal
     recurring nature. Certain amounts have been reclassified to conform to the
     September 30, 2000 presentation. The balance sheet at December 31, 1999,
     was derived from audited financial statements at such date.

     The results of operations for the three and nine months ended September 30,
     2000 and 1999, are not necessarily indicative of the results to be expected
     for the full year.

2.   CONSOLIDATION

     The accompanying financial statements have been prepared on a consolidated
     basis, including the accounts of Clear Creek Ltd. ("Clear Creek"). All
     significant intercompany transactions and balances have been eliminated.



                                     6 of 12
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                         FORM 10-QSB SEPTEMBER 30, 2000
                         ------------------------------

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
        ---------------------------------------------------------

        The matters discussed in this Form 10-QSB contain certain
        forward-looking statements and involve risks and uncertainties
        (including changing market conditions, competitive and regulatory
        matters, etc.) detailed in the disclosure contained in this Form 10-QSB
        and the other filings with the Securities and Exchange Commission made
        by the Partnership from time to time. The discussion of the
        Partnership's liquidity, capital resources and results of operations,
        including forward-looking statements pertaining to such matters, does
        not take into account the effects of any changes to the Partnership's
        operations. Accordingly, actual results could differ materially from
        those projected in the forward-looking statements as a result of a
        number of factors, including those identified herein.

        This Item should be read in conjunction with the financial statements
        and other items contained elsewhere in the report.

        Liquidity and Capital Resources
        -------------------------------

        As of September 30, 2000, the Partnership retained an equity interest in
        five Local Limited Partnerships, each of which owns a single apartment
        complex. The Partnership also owns an 88.5% interest in Clear Creek Ltd.
        ("Clear Creek"), a partnership in which an affiliate of the
        Partnership's general partner is the sole general partner. The
        Partnership's primary sources of income are distributions from the Local
        Limited Partnerships and rental income from Clear Creek Apartments. The
        Partnership requires cash to pay the operating expenses of Clear Creek,
        for general and administrative expenses and to make capital
        contributions and/or loans to any of the Local Limited Partnerships
        which the Managing General Partner deems to be in the Partnership's best
        interest.

        To date, all cash requirements have been satisfied by interest income
        earned on short-term investments, rental income from Clear Creek and
        cash distributed to the Partnership by the Local Limited Partnerships.
        If the Partnership funds any operating deficits, it will use monies from
        its operating reserves. As of September 30, 2000, the Partnership had
        cash and cash equivalents of $2,821,000, as compared to $2,683,000 at
        December 31, 1999. The Managing General Partner's current policy is to
        maintain a reserve balance sufficient to provide the Partnership the
        flexibility to preserve its economic interest in the Local Limited
        Partnerships. Therefore, a lack of cash distributed by the Local Limited
        Partnerships to the Partnership in the future should not deplete the
        reserves, though it may restrict the Partnership from making
        distributions. The Partnership did not fund any operating deficits to
        Local Limited Partnerships in 2000 and 1999.

        The level of liquidity based on cash and cash equivalents experienced a
        $138,000 increase at September 30, 2000, as compared to December 31,
        1999. The Partnership's $576,000 of distributions received from Local
        Limited Partnerships (investing activities) and $246,000 of net cash
        provided by operating activities was partially offset by $109,000 of
        property improvements (investing activities), $46,000 of mortgage
        principal payments and $529,000 of cash distributed to partners
        (financing activities). Village Square Associates, a Local Limited
        Partnership ("Village Square") refinanced its mortgage and distributed
        $942,000 of the proceeds to the Partnership in September 1999. At
        December 31,1999, the Partnership


                                     7 of 12
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                         FORM 10-QSB SEPTEMBER 30, 2000
                         ------------------------------

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
        ---------------------------------------------------------

        Liquidity and Capital Resources (Continued)
        -------------------------------------------

        recorded an accrued distribution of $475,000 related to the refinancing
        proceeds which was distributed in the quarter ended March 31, 2000. In
        addition, as of September 30, 2000, Partnership distributions (paid or
        accrued) aggregated approximately $75,000 ($3.00 per Unit) to its
        limited partners and $6,000 to the general partners.

        The Partnership is not obligated to provide any additional funds to the
        Local Limited Partnerships to fund operating deficits. The Partnership
        determines on a case by case basis whether to fund any operating
        deficits. If a Local Limited Partnership sustains continuing operating
        deficits and has no other sources of funding, it is likely that it will
        eventually default on its mortgage obligations and risk a foreclosure on
        its property by the lender. If a foreclosure were to occur, the Local
        Limited Partnership would lose its investment in the property and would
        incur a tax liability due to the recapture of tax benefits taken in
        prior years. The Partnership, as an owner of the Local Limited
        Partnership, would share these consequences in proportion to its
        ownership interest in the Local Limited Partnership.

        In 1999, the Department of Housing and Urban Development foreclosed on
        the mortgage for Dunhaven Apartments Phase II ("Dunhaven"). For
        financial reporting purposes, the Partnership's investment in this Local
        Limited Partnership had previously been written down to zero. For tax
        reporting purposes, the Partnership will incur a tax liability in 2000
        due to the recapture of tax benefits taken in prior years in proportion
        to its ownership interest in the Local Limited Partnership.

        Clear Creek had two housing assistance contracts with the Department of
        Housing and Urban Development, which account for approximately 20% of
        the units in the apartment complex. These contracts expired in 1999 and
        were not renewed. Management replaced the housing assistance contracts
        with subsidized payments from a local subsidy contract.

        Results of Operations
        ---------------------

        Net income decreased by $610,000 for the nine months ended September 30,
        2000, as compared to the nine months ended September 30, 1999. The
        decrease is due to a decrease in income of $625,000 which was partially
        offset by a decrease in expenses of $15,000. Net income for the three
        months ended September 30, 2000 decreased by $972,000 as compared to
        1999.

        The decrease in income for the nine months ended September 30, 2000, as
        compared to 1999, is due to a decrease of $745,000 of cash received from
        Local Limited Partnerships which was partially offset by a decrease of
        $47,000 of equity in loss of Local Limited Partnership, an increase in
        interest income of $37,000 and an increase in rental income of $37,000.
        During the nine months ended September 30, 2000, the Local Limited
        Partnerships owning Village Square Apartments, Maple Manor Apartments
        and The Groves Apartments distributed $489,000, $48,000 and $39,000,
        respectively. During the nine months ended September 30, 1999, the Local
        Limited Partnerships owning Village Square Apartments and The Groves
        Apartments distributed $1,308,000 and $13,000, respectively. All other
        items of income and expense remained relatively constant.

                                     8 of 12
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                         FORM 10-QSB SEPTEMBER 30, 2000
                         ------------------------------


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

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
        ---------------------------------

        (a)  Exhibits

             27.  Financial Data Schedule

             99.  Supplementary Information Required Pursuant to Section 9.4 of
                  the Partnership Agreement.

        (b)  Reports on Form 8-K:

             No reports on Form 8-K were filed during the period ended
             September 30, 2000.



                                     9 of 12

<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                         FORM 10-QSB SEPTEMBER 30, 2000
                         ------------------------------

                                   SIGNATURES
                                   ----------

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

                                    WINTHROP RESIDENTIAL ASSOCIATES III,
                                    ------------------------------------
                                    A LIMITED PARTNERSHIP
                                    ---------------------


                                    BY: TWO WINTHROP PROPERTIES, INC.
                                        Managing General Partner

                                    BY: /s/ Michael L. Ashner
                                        --------------------------------------
                                        Michael L. Ashner
                                        Chief Executive Officer

                                    BY: /s/ Thomas Staples
                                        --------------------------------------
                                        Thomas Staples
                                        Chief Financial Officer



                                        Dated: November 10, 2000














                                    10 of 12
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                         FORM 10-QSB SEPTEMBER 30, 2000
                         ------------------------------

Exhibit Index

         Exhibit                                                        Page No.
         -------                                                        --------

27.      Financial Data Schedule                                           -

99.      Supplementary Information Required Pursuant to
         Section 9.4 of the Partnership Agreement.                        12








                                    11 of 12