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, 1998
                               or
  [  ] Transition Report Pursuant to Section 13 or 15(d) of the
                  Securities Exchange Act of 1934
       For the transition period from _________________ to _________________
                                
                Commission file number:  0-25210


                          NEOPATH, INC.
     (Exact name of registrant as specified in its charter)


Washington                                        91-1436093
(State or Other Jurisdiction of                   (I.R.S. Employer
Incorporation or Organization)                    Identification No.)


8271 - 154th Avenue NE, Redmond, Washington       98052
(Address of Principal Executive Offices)          (Zip Code)

Registrant's Telephone Number, Including Area Code:  (425) 869-7284
                                

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 shares outstanding  of  each  of  the
issuer's  classes of common stock, as of the latest practicable
date.
       Class                             Outstanding at April 30, 1998
(Common stock, $.01 par value)                   14,468,220
                                
<PAGE>
                                

                                
                          NEOPATH, INC.
                                
                 QUARTERLY  REPORT ON FORM 10-Q
                                
                        TABLE OF CONTENTS
     
     
                                
     Part I   FINANCIAL INFORMATION

                                                                            Page
                                                                            ____

     Item 1.  Financial Statements                                             1
     
              Balance Sheets -- March 31, 1998 (unaudited) and 
                December 31, 1997
     
              Statements of Operations (unaudited) -- for the three months
                ended March 31, 1998 and 1997
     
              Statements of Cash Flows (unaudited) -- for the three months 
                ended March 31, 1998 and 1997
     
              Notes to Financial Statements
      
     Item 2.  Management's Discussion and Analysis of Financial Condition 
                and Results of Operations                                      6
     
     Item 3.  Quantitative and Qualitative Disclosures About Market Risk       9
     
     
     Part II  OTHER INFORMATION
     
     Item 1.  Legal Proceedings                                               10
     
     Item 6.  Exhibits and Reports on Form 8-K                                10
     
     
     Signatures                                                               11
     
<PAGE>
                                
Part 1   FINANCIAL INFORMATION 

Item 1.  Financial Statements  
                                                        
                               NEOPATH, INC.

                              BALANCE SHEETS                                
                                                        
                                                        
                                            March 31,              December 31,
                                              1998                     1997
                                          _____________           ______________
                                           (Unaudited)  
Assets

Current assets:
   Cash and cash equivalents             $   4,270,025            $   3,308,970
   Securities available-for-sale            17,670,331               25,409,633
   Accounts receivable, net                  4,283,846                3,863,818
   Inventories                               8,880,753                7,514,001
   Other current assets                        348,146                  187,147
                                         _____________            _____________ 
Total current assets                        35,453,101               40,283,569
                                                        
Fee-per-use systems, net                     7,506,822                8,564,189
Property and equipment, net                  5,562,203                5,979,849
Intangible assets, net                       3,195,930                3,383,925
Deposits and other assets                      808,763                  729,280
                                         _____________            _____________
Total assets                             $  52,526,819            $  58,940,812
                                         =============            =============
Liabilities and shareholders' equity                                           
                                                        
Current liabilities:                                                       
   Accounts payable                      $   1,867,351            $   2,173,179
   Salaries and wages payable                1,351,635                2,357,045
   Customer deposits                           400,609                  431,877
   Other accrued liabilities                   988,120                  567,759
   Current portion of obligations under 
     capital leases                             82,568                   80,966
                                         _____________            _____________
Total current liabilities                    4,690,283                5,610,826
                                                        
Obligations under capital leases, 
  less current portion                          82,371                  101,872
                                                        
Shareholders' equity:                                                       
   Common stock                            141,199,048              141,057,881
   Accumulated deficit                     (93,309,751)             (87,633,118)
   Accumulated other comprehensive loss       (135,132)                (196,649)
                                         _____________            _____________
Total shareholders' equity                  47,754,165               53,228,114
                                         _____________            _____________
Total liabilities and shareholders' 
  equity                                 $  52,526,819            $  58,940,812
                                         =============            =============
                                 
See accompanying notes.                                                       
                                
Page 1
<PAGE>
                                
                               NEOPATH, INC.

                         STATEMENTS OF OPERATIONS
                               (Unaudited)
                                                                        
                                                                        
                                                   Three months ended       
                                                        March 31,             
                                             _____________________________
                                                   1998            1997        
                                             ____________     ____________ 
Revenues                                     $  3,562,691     $  2,234,552
Cost of revenues                                2,040,760        1,077,512
                                             ____________     ____________
   Gross margin                                 1,521,931        1,157,040
                                                               
Operating expenses:                                                    
   Research and development                     3,045,816        4,386,856
   Selling, general and administrative          4,506,243        3,695,671 
                                             ____________     ____________     
                                                7,552,059        8,082,527
                                             ____________     ____________
     
Loss from operations                           (6,030,128)      (6,925,487)

Interest income                                   365,774          745,666
Interest expense                                   (9,279)          (6,485)
                                             ____________      ___________
Net loss                                     $ (5,673,633)      (6,186,306)
                                             ============      ===========
        
Basic and diluted net loss per share         $      (0.39)     $     (0.45)
                                             ============      =========== 
                                                               
Weighted average common shares outstanding     14,415,851       13,771,635
                                             ============      ===========
                                                                         
See accompanying notes.                                        

Page 2
<PAGE>

                                                                          
 
                                NEOPATH, INC.
                                                                          
                           STATEMENTS OF CASH FLOWS    
                                (Unaudited)                                     
                                                                          
                                                       Three months ended
                                                           March 31,          
                                                 ____________________________
                                                      1998            1997
                                                 ____________    ____________
Operating activities                                                
Net loss                                         $ (5,673,633)   $ (6,186,306)
Adjustments to reconcile net loss to net cash                          
  used in operating activities: 
     Depreciation and amortization                  1,408,059         758,877
     Deferred compensation                                 --          74,246
     Accrued interest on securities 
       available-for-sale                             191,903         458,950
     Net change in operating accounts:                             
       Accounts receivable                           (420,028)     (1,097,546)
       Inventories and fee-per-use systems           (840,016)     (2,715,121)
       Accounts payable and accrued liabilities      (851,663)        494,056
       Other                                         (240,250)       (372,473)
                                                 ____________    ____________  
Net cash used in operating activities              (6,425,628)     (8,585,317)
                                                                            
Investing activities                                                      
Purchases of securities available-for-sale                 --      (1,101,093)
Maturities of securities available-for-sale         7,608,916      11,500,000
Additions to property and equipment                  (274,616)       (305,796)
Other                                                    (403)         (1,040)
                                                 ____________    ____________  
Net cash provided by investing activities           7,333,897      10,092,071
                                                                            
Financing activities                                            
Exercise of options and warrants                       70,685       3,623,425
Principal payments on obligations under 
  capital leases                                      (17,899)        (21,956)
                                                 ____________    ____________
Net cash provided by financing activities              52,786       3,601,469
                                                 ____________    ____________
Net increase in cash and cash equivalents             961,055       5,108,223
Cash and cash equivalents:                                                
  Beginning of period                               3,308,970       7,871,401
                                                 ____________    ____________
  End of period                                  $  4,270,025    $ 12,979,624
                                                 ============    ============
                                            
Noncash transactions and supplemental disclosures              
Inventories reclassified to fee-per-use 
  systems, net                                   $   (520,831)   $    802,834 
Inventories reclassified to property 
  and equipment                                            --         330,174
                                                                               
See accompanying notes.                                       
                                                                
Page 3
<PAGE>
                                
                                
                          NEOPATH, INC.
                                
                  NOTES TO FINANCIAL STATEMENTS
                           (Unaudited)
                                
Note 1 - Basis of Presentation

      The  accompanying unaudited financial statements have  been
prepared  by  NeoPath,  Inc.  ("NeoPath"  or  the  "Company")  in
accordance  with  generally  accepted accounting  principles  for
interim  financial information and according  to  the  rules  and
regulations   of   the   Securities  and   Exchange   Commission.
Accordingly,  they  do  not include all of  the  information  and
footnotes  required  by generally accepted accounting  principles
for  complete financial statements. In the opinion of management,
all adjustments (which include only normal recurring adjustments)
considered necessary for a fair presentation have been  included.
The  balance sheet at December 31, 1997 has been derived from the
audited  financial statements at that date, but does not  include
all  of  the  information  and footnotes  required  by  generally
accepted accounting principles for complete financial statements.
The  results of operations for the three-month period ended March
31,  1998,  are  not  necessarily indicative  of  results  to  be
expected for the entire year ending December 31, 1998 or for  any
other  fiscal  period.   For further information,  refer  to  the
financial  statements  and  footnotes  thereto  incorporated   by
reference in the Company's Form 10-K for the year ended  December
31, 1997.

Note 2 - Revenue Recognition

       The   Company  recognizes  AutoPap(R)  System  fee-per-use
revenues  based  on  the  number of  customer  slides  processed,
subject  to  agreed-upon  minimum processing  levels  or  minimum
rental  payments,  beginning in the month an  AutoPap  System  is
initially  placed in commercial use at the customer site.   Sales
of  AutoPap Systems and Pathfinder Systems are recognized at date
of shipment.

Note 3 - Recently Issued Accounting Standards

      As of January 1, 1998, NeoPath adopted Financial Accounting
Standards   Board   ("FASB")   Statement   No.  130,   "Reporting  
Comprehensive Income."   Statement 130 establishes new  rules for 
the reporting and display of comprehensive income or loss and its 
components; however, the adoption of this Statement had no impact  
on  the  Company's  operating  results  or  shareholders' equity.   
Statement 130   requires  unrealized   gains  or  losses  on  the  
Company's   securities    available-for-sale,  which   prior   to  
adoption  were  reported  within  shareholders'  equity,  to   be 
included  in  other  comprehensive  income  or  loss.   Statement  
130   also   requires   presentation    of   accumulated    other 
comprehensive   income  or  loss  separately   in   shareholders'  
equity;   accordingly,  prior   year  financial  statements  have 
been reclassified to conform to these requirements.

     Components of comprehensive net loss are as follows:

                                        Three months ended March 31,
                                   _____________________________________
                                          1998                 1997
                                   _____________________________________
     Net loss                        $ (5,673,633)        $ (6,186,306)
     Unrealized gain (loss) on    
       securities available-for-sale       61,517             (200,164)
                                   _____________________________________
     Comprehensive net loss          $ (5,612,116)        $ (6,386,470)
                                   =====================================
Page 4
<PAGE>

      In  1997,  the FASB issued Statement  No. 131, "Disclosures 
about Segments of an  Enterprise and  Related Information," which 
is required to be  adopted  for periods  beginning after December 
15, 1997.   The  new  Statement supersedes FASB Statement No. 14,
"Financial  Reporting  for Segments of  a  Business  Enterprise."
Companies  will be required to report each operating segment  and
related  information,  as  defined  in  Statement  131,  in   the
notes to financial statements.  NeoPath  plans to  adopt the  new 
Statement in 1998.   Statement 131 is not required to  be applied  
to interim financial statements in the initial year of adoption.

Note 4 - Inventories

     Inventories consist of the following:

                                                    
                                 March 31, 1998    December 31, 1997
                               ______________________________________
     Raw materials                $ 2,933,182         $ 3,819,830
     Work-in-process                1,773,674           1,061,900
     Finished goods                 4,173,897           2,632,271
                               ______________________________________
                                  $ 8,880,753         $ 7,514,001
                               ======================================

Note 5 - Purchase of Pathfinder System Product Line

     NeoPath acquired the Pathfinder System product line in  June
1997  for an initial purchase price of $4.1 million.  The initial
purchase   price   included  cash  of  $2.7  million   (including
transaction-related expenses), a $500,000 short-term note paid in
October  1997,  and  48,564 shares of NeoPath  common  stock.  In
addition, certain shares of NeoPath common stock were issued  and
were  held  in escrow contingent upon certain specific technology
decisions  to be made within one year of closing.  In April  1998
the  Company  released  the  remaining  shares  held  in  escrow,
consisting  of  approximately 42,000  shares  of  NeoPath  common
stock,  resulting  in  recognition of an additional  $550,000  in
intangible assets that will be amortized over the remaining five-
year amortization term established in June 1997.

Note 6 -  Litigation

        On    July   15,   1996,   Neuromedical   Systems,   Inc.
("Neuromedical")  filed a lawsuit against NeoPath,  Inc.  in  the
United  States  District Court for the Southern District  of  New
York.    The   complaint  alleges  patent  infringement,   unfair
competition, false advertising, and related claims. On  September
5,  1996,  the Company filed its answer and counter  claims.   In
September  1997, a motion for preliminary injunction against  the
Company was heard by a judge in the United States District  Court
for  the Southern District of New York.  No decision has yet been
rendered.  The Company believes it has a strong position in  this
action and continues to defend itself vigorously.

      On  March 31, 1997, the Company filed a patent infringement
lawsuit against Neuromedical in the United States District  Court
for  the  Western District of Washington.  The complaint  alleges
patent  infringement  and  seeks  permanent  injunctions  against
Neuromedical.  In March and April 1998 this lawsuit was  amended,
and   NeoPath   filed  an  additional  related  lawsuit   against
Neuromedical.  Neuromedical filed a motion for summary  judgment,
which  motion  was  denied  by the court  in  April  1998.   Both
lawsuits are currently in the discovery stage.

Page 5
<PAGE>

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

Overview

     NeoPath,  Inc.  ("NeoPath" or the  "Company")  develops  and
markets  visual intelligence technology to increase  accuracy  in
medical  testing.   NeoPath's initial products  include  (i)  two
automated screening systems that integrate proprietary high-speed
image   processing  computers,  video  imaging   technology   and
sophisticated  image  interpretation  software  to  capture   and
analyze  thousands  of  microscopic images  from  a  Papanicolaou
("Pap")  smear  slide for the early detection of cervical  cancer
and (ii) the Pathfinder(R) System product line acquired in 1997.

     In 1995, the United States Food and Drug Administration (the
"FDA")  cleared  for commercial use the Company's first  product,
the AutoPap(R) 300 QC Automatic Pap Screener System (the "AutoPap
QC").   In  early  1996, the Health Care Financing Administration
officially allowed clinical laboratories to use the AutoPap QC in
the  quality  control review of Pap smear slides that  have  been
initially screened by cytologists and classified as normal.   The
decision  allows  AutoPap  QCs to be used  in  determining  which
slides   will   be   rescreened  under  the  federally   mandated
rescreening requirement.
 
     NeoPath's  second  product is the AutoPap  Primary Screening
System  (the  "AutoPap  Screener" and, in  combination  with  the
AutoPap  QC, the "AutoPap System"). The AutoPap Screener utilizes
the  same hardware components as the AutoPap QC; however, it uses
enhanced   software,   including  additional  cell-classification
algorithms.    During  1997,  NeoPath  completed  a   prospective
intended-use  clinical study to evaluate the performance  of  the
AutoPap  Screener  as  a primary screening  system.   This  study
included  analysis of more than 25,000 Pap smear slides  at  five
clinical laboratories in the United States and Canada.  In August
1997,  NeoPath submitted the results of the study in an amendment
to  its pending PreMarket Approval ("PMA") Supplement to the FDA,
for  use  of  the AutoPap Screener as a primary screener  of  Pap
smear  slides.   In  January 1998, the Hematology  and  Pathology
Devices  Advisory  Panel  of  the FDA (the  "Panel")  unanimously
recommended that the FDA approve, with conditions, the supplement
to NeoPath's PMA submission for use of the AutoPap Screener as  a
primary Pap smear screener.  On May 5, 1998, the FDA followed the
Panel's recommendation and approved the AutoPap Screener for  use
as  a combined primary screener and quality control rescreener of
Pap  smear slides.  As approved by the FDA, the AutoPap  Screener
demonstrates a statistically significant increase in  identifying
disease when compared to current practice.
 
     NeoPath's  Pathfinder System provides improved  productivity
and  quality  assurance  in the clinical cytology  laboratory  by
computerizing the cytotechnologists' microscopes, thereby helping
to  eliminate  screening  errors and facilitating  critical  cell
identification in applications such as Pap smear screening.

Results of Operations
                                                       
                        Three months ended                    Three months ended
(in thousands)            March 31, 1998         Change         March 31, 1997
________________________________________________________________________________
Revenues                      $3,563             $1,328             $2,235
                                                    59%

     The  Company recognizes revenue on either a sale or fee-per-
use   basis   (subject  to  certain  license  agreements,   lease
contracts, and minimum payments on fee-per-use contracts).  Under
its fee-per-use program, the Company retains ownership of AutoPap
Systems placed at customer sites and assesses customers a  charge
for each Pap smear slide analyzed.
 
     NeoPath's  AutoPap System placements to date have  consisted
of  fee-per-use  contracts (and limited  sale contracts)  in  the
United  States  and  primarily  sale  contracts  internationally.
Approximately  two thirds of total revenues in the  three  months
ended March 31, 1998 and 1997, respectively, consisted of AutoPap
System  sales  worldwide.   The  remaining  one  third  of  total
revenues consisted of fee-per-use contract billings and, in 1998,
Pathfinder  System   sales.   Pathfinder  System  sales accounted  
for  less  than   four   percent  of  total  first  quarter  1998 
revenues.   The   Company  anticipates   that    future   AutoPap   
System  placements  will  continue  to  consist  of both fee-per-

Page 6
<PAGE>

use  and  sale  contracts;  however,  the  Company  expects  that 
revenues for the next several quarters  will  continue to consist 
of greater sales of AutoPap Systems  than revenues generated from  
NeoPath's fee-per-use program.  The sales mix may vary as product 
features and  markets  mature,  and  as  third-part reimbursement 
policies change.

     NeoPath  has  placed AutoPap Systems at  customer  sites  in
Japan,  Korea,  Hong Kong, Europe, and Australia.  First  quarter
1998  revenues  included additional AutoPap System placements  in
Hong  Kong and Japan.  All of the Company's international product
placements have been denominated in U.S. dollars; however, future
product  revenues  may  include  customer  contracts  subject  to
foreign  exchange  rate  changes.  Approximately  23  percent  of
NeoPath's revenues in the first quarter of 1998 represented sales
to   customers  outside  of  the  United  States,   compared   to
approximately 72 percent in the same period in 1997.

     NeoPath believes that increased third-party reimbursement of
Pap  smears in general, and increased reimbursement for screening
utilizing  the  AutoPap System in particular, will  significantly
increase the Company's potential for revenues in 1998 and beyond.
In  October 1997, the American Medical Association published  its
revised Physicians' Current Procedural Terminology (CPT-4)  codes
which  included  a  code  that applies  to  the  AutoPap  QC  for
automated cervical cancer rescreening.  CPT codes are a universal
system  used by physicians and clinical laboratories to  identify
specific procedures when billing insurers for their services.  In
early 1998, NeoPath formed a five-person team to work with third-
party insurers and managed care organizations to establish and/or
improve  third-party reimbursement levels for the AutoPap System.
These managed care specialists are working closely with NeoPath's
field sales personnel throughout the United States.

<TABLE>
<CAPTION>                                                          
                   Three months ended    Percentage of   Three months ended   Percentage of
(in thousands)       March 31, 1998        Revenues        March 31, 1997       Revenues
____________________________________________________________________________________________
<S>                     <C>                 <C>              <C>                  <C>     
Cost of revenues         $2,041              57%              $1,078               48%
                                                    
Gross margin              1,522              43%               1,157               52%
</TABLE>

     The  change in gross margin percentage from one year ago was
attributable  to  1997 international sales under  a  distribution
agreement   with  higher  initial  AutoPap  System   pricing   in
comparison  to  1998  list  prices,  as  well  as  certain  sales
discounts offered to existing customers during the first  quarter
of 1998.
 
     Gross  margin is expected to fluctuate depending on the  mix
of   fee-per-use  revenues,  AutoPap  System  sales,  and   other
revenues,  as  well  as  sales incentive  programs  that  may  be
offered.  The continued development of the manufacturing, service
and  support functions, as well as overall production levels, are
also  expected  to  contribute to fluctuations in  gross  margin.
Therefore,   the  Company's  historic  gross  margins   are   not
necessarily indicative of future gross margins.
                                                           
                          Three months ended                Three months ended
(in thousands)              March 31, 1998        Change      March 31, 1997
_______________________________________________________________________________
                                                       
Research and development        $3,046           $(1,341)          $4,387 
                                                    (31%)

     The  Company incurred higher research and development  costs
in  1997  due  primarily to NeoPath's AutoPap  Screener  clinical
study  which  was completed in 1997.  The Company  also  incurred
lower  regulatory  expenses in the first quarter  of  1998,  even
though  NeoPath presented to the FDA's Hematology  and  Pathology
Devices Advisory Panel on January 28, 1998.
     
Page 7
<PAGE>
     
                                                            
                       Three months ended              Three months ended
(in thousands)           March 31, 1998       Change     March 31, 1997
__________________________________________________________________________    

Selling, general and                                                        
administrative               $4,506           $810           $3,696         
                                               22%

     Selling, general  and administrative expenses increased from
the  first  quarter of 1997 due primarily to continued investment
in  significant new sales and marketing initiatives, expansion of
the  sales  and  reimbursement team, and  costs  related  to  the
purchase  and  integration of the Pathfinder System product  line
acquired in June 1997.
                                                            
                       Three months ended               Three months ended
(in thousands)           March 31, 1998       Change      March 31, 1997
____________________________________________________________________________    
                                                        
Interest income               $366            $(380)            $746          
                                               (51%)

     The decrease in interest income in 1998 is due  to decreased
cash equivalents and securities available-for-sale resulting from
NeoPath's negative operating cash flow.  The Company expects that
its  interest income will decline further in 1998 as a result  of
declining cash available for investment purposes.
 
Liquidity and Capital Resources
 
     As of March 31, 1998, the Company had $21.9 million in cash, 
cash equivalents, and securities available-for-sale,  compared to 
$28.7 million as of December 31, 1997.   The decrease is a result 
of cash used in the  Company's  operations for  the  three months 
ended  March 31, 1998.   The  Company's  cash  used in  operating 
activities was $6.4 million and $8.6 million in the three  months  
ended  March 31,  1998  and  1997,  respectively.    The  Company  
expended  cash  for property  and  equipment,  excluding  AutoPap  
Systems   reclassified   to   either   fee-per-use   systems   or  
reclassified to property and equipment, of $275,000 and  $306,000
in the quarters ended March 31, 1998 and 1997, respectively.

     The Company expects negative cash flow  from  operations  to
continue at least through the majority of 1998 as it manufactures
AutoPap   Systems  to  support  fee-per-use  product  placements,
continues  to  expand its marketing, sales, and customer  service
and  support capabilities, continues its research and development
activities  and conducts and analyzes data from clinical  trials.
The  Company has obtained a bank financing facility to borrow  up
to  $10  million based on current and future fee-per-use  AutoPap
Systems   placed  at  customer  sites.   The  Company   currently
estimates  that its existing cash resources and established  bank
financing  will enable it to sustain operations for at least  the
next twelve months.  There can be no assurance, however, that the
Company will not be required to seek additional cash in the  form
of  either  debt  or  equity at an earlier date.   The  Company's
future   capital  requirements  will  depend  on  many   factors,
including  the extent and rate of adoption of use of the  AutoPap
QC  and the AutoPap Screener; the increased market acceptance  of
the  Company's  fee-per-use program; the mix of  fee-per-use  and
sale  placements; the market acceptance of the Pathfinder System;
the  extent  and rate of development of the Company's  marketing,
sales,  and  customer service and support capabilities;  and  the
status  of  competing products.  The Company may,  from  time  to
time,   seek   additional  funding  through  public  or   private
financing, including equity financing.  There can be no assurance
that  adequate funding will be available as needed  or  on  terms
acceptable  to  the Company.  If additional funds are  raised  by
issuing  equity securities, existing shareholders will experience
dilution.   Insufficient funds may require the Company to  delay,
scale  back  or  eliminate  some or  all  of  its  manufacturing,
research and development or clinical programs.

Impact of Year 2000

     Some of the  Company's   internal   and   product   software  
programs   were   written   using  two  digits  rather than  four 
to   define   the   applicable    year.     As  a  result,  those 
computer programs have time-sensitive  software   that  recognize
a  date  using  "00"  as  the  year  1900  rather  than the  year  
2000.  The  Company  has   completed  a   preliminary  assessment  
and  will  have  to  modify   or   replace   portions    of   its  
internal  and product  software so that its computer systems will 

Page 8
<PAGE>

function  properly  with  respect  to dates in the year  2000 and 
thereafter.   The  project is estimated to be  completed in early 
1999, and the total Year 2000  project cost is not expected to be 
material.

     The  Company  believes  that  with modifications to existing 
software  and  conversions to new software, the  Year 2000  Issue  
will  not pose  significant operational problems for its computer  
systems.  However,  if such modifications and conversions are not 
made,  or are not  completed  timely, the Year 2000  Issue  could  
have a material impact on NeoPath's operations.
 
Forward-Looking Statements
 
     The   preceding   Management's  Discussion  and  Analysis of 
Financial Condition and Results  of Operations contains "forward-
looking statements" which reflect  the  Company's  current  views  
with  respect   to  future   events  and  financial  performance.   
These forward-looking statements  are subject  to  certain  risks  
and uncertainties that could  cause  actual  result   to   differ
materially  from  historical results or those  anticipated.   The
words  "plan,"  "expect," "anticipate," and  similar  expressions
identify  forward-looking statements.  Readers are cautioned  not
to  place  undue  reliance  on these forward-looking  statements,
which  speak  only as of their dates.  The Company undertakes  no
obligation  to  publicly  update or  revise  any  forward-looking
statements,  whether  as  a  result of  new  information,  future
events, or otherwise.  Factors that could cause actual results to
differ  materially from historical results or  those  anticipated
include, without limitation, the following: the Company's limited
operating history and history of losses; market acceptance of the
Company's  products; the acceptance of the Company's  fee-per-use
or sale programs; product and manufacturing regulatory approvals;
the  Company's  limited marketing, sales,  customer  service  and
support  capabilities;  uncertainties relating  to  international
transactions; the Company's sole or limited source of  supply  of
certain  components; the status of competing products; dependence
on  reimbursement;  dependence on single  product  line;  product
liability; dependence on patents and property rights; the risk of
third-party  claims  of  infringement;  and  dependence  on   key
personnel.  For a more detailed discussion of these factors,  see
"Factors Affecting Future Results and Forward-Looking Statements"
of the Company's Form 10-K for the fiscal year ended December 31,
1997.
 
Item  3.   Quantitative and Qualitative Disclosures About  Market
Risk
 
     Not applicable.


Page 9
<PAGE>

Part II   OTHER INFORMATION

Item 1. Legal Proceedings

        On    July   15,   1996,   Neuromedical   Systems,   Inc.
("Neuromedical")  filed a lawsuit against NeoPath,  Inc.  in  the
United  States  District Court for the Southern District  of  New
York.    The   complaint  alleges  patent  infringement,   unfair
competition, false advertising, and related claims. On  September
5,  1996,  the Company filed its answer and counter  claims.   In
September  1997, a motion for preliminary injunction against  the
Company was heard by a judge in the United States District  Court
for  the Southern District of New York.  No decision has yet been
rendered.  The Company believes it has a strong position in  this
action and continues to defend itself vigorously.

      On  March 31, 1997, the Company filed a patent infringement
lawsuit against Neuromedical in the United States District  Court
for  the  Western District of Washington.  The complaint  alleges
patent   infringement   and  seeks  permanent injunctions against 
Neuromedical. In March and April  1998  this lawsuit was amended,  
and  NeoPath  filed  an  additional   related   lawsuit   against 
Neuromedical.  Neuromedical filed a motion for summary  judgment, 
which  motion  was  denied  by  the  court  in  April 1998.  Both 
lawsuits are currently in the discovery stage.
  

Item 6.  Exhibits and Reports on Form 8-K

(a)  The following exhibits are filed as part of this report.

     Exhibit No.     Description
     ___________     ___________

     27              Financial Data Schedule
     


(b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the quarter ended
March 31, 1998.

Page 10
<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.

                                 NeoPath, Inc.


Date:   May 11, 1998             By:  /s/ ALAN C. NELSON
                                      __________________
                                      Alan C. Nelson
                                      President and Chief Executive Officer


                                 By:  /s/ WILLIAM L. SCOTT
                                      ____________________
                                      William L. Scott
                                      Vice President and Chief Financial Officer


                                 By:  /s/ ROBERT C. BATEMAN
                                      _____________________
                                      Robert C. Bateman
                                      Corporate Controller and Treasurer

Page 11
<PAGE>




                          NEOPATH, INC.
                                
                        INDEX TO EXHIBITS



     Exhibit No.    Description
     ___________    ___________
 
     27             Financial Data Schedule

<PAGE>