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, 1997
                                     or
  [  ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
                            Exchange Act of 1934
                                      
                      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 29, 1997
(Common stock, $.01 par value)                       14,269,511

<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, 1997
              (unaudited) and December 31, 1996
     
             Statements  of  Operations (unaudited)  --
              for the three months ended March 31,
              1997 and 1996
     
             Statements  of  Cash Flows  (unaudited) --
              for the three months ended March 31,
              1997 and 1996
     
             Notes to Financial Statements
     
     Item 2. Management's Discussion and Analysis of
             Financial Condition and Results of Operations        6
     
     
     Part II OTHER  INFORMATION
     
     Item 1. Legal Proceedings                                    9
     
     Item 6. Exhibits and Reports on Form 8-K                     9
     
     Signatures                                                   10
     
     
     
                                      
<PAGE>

Part I     FINANCIAL INFORMATION 
Item 1.    Financial Statements
                                                                               
                    NEOPATH, INC.

                   BALANCE SHEETS
                                                                               
                                                                               
<TABLE>
<CAPTION>
                                                                               
                                                                               
                                                           March 31,     December 31,
                                                             1997            1996
                                                          -----------    ------------
                                                          (Unaudited)          
<S>                                                      <C>             <C>
Assets
Current assets:                                                                      
   Cash and cash equivalents                              $12,979,624     $ 7,871,401
   Securities available-for-sale                           39,558,456      50,616,477
   Accounts receivable,net                                  1,937,802         840,256
   Inventories                                              7,224,027       5,641,914
   Other current assets                                       570,199         197,726
                                                           ----------      ----------
Total current assets                                       62,270,108      65,167,774
                                                                                     
Fee-per-use systems, net                                    6,564,944       5,994,137
Property and equipment, net                                 4,922,865       4,813,745
Deposits and other assets                                     156,939         155,899
                                                          -----------     -----------
Total assets                                              $73,914,856     $76,131,555
                                                          ===========     ===========                      
Liabilities and shareholders' equity                                                 
                                                                                     
Current liabilities:                                                                 
   Accounts payable                                       $ 1,923,627     $ 1,496,630
   Salaries and wages payable                               1,341,625       2,208,454
   Other accrued liabilities                                1,499,827         565,939
   Current portion of obligations under capital leases         74,369          75,861
                                                          -----------     -----------
Total current liabilities                                   4,839,448       4,346,884
                                                                                     
Obligations under capital leases, less current portion        162,071         182,535
                                                                                     
                                                                                     
                                                                                     
Shareholders' equity:                                                                
   Common stock                                           139,879,171     136,255,746
   Deferred compensation                                            -         (74,246)
   Accumulated deficit                                    (70,965,834)    (64,579,364)
                                                         ------------     ------------
Total shareholders' equity                                 68,913,337      71,602,136
                                                         ------------     -----------
Total liabilities and shareholders' equity                $73,914,856     $76,131,555
                                                         ============     ===========                       
                                                                                     
                                                                                     
                                                                                     
</TABLE>
                                                                               
See accompanying notes.

Page 1
<PAGE>
                                      
                                                                        
                                                                        
              NEOPATH, INC.
                                                                        
        STATEMENTS OF OPERATIONS
               (Unaudited)
                                                                        
                                                                        
                                                                        
                                              Three months ended
                                                   March 31,                   
                                              1997            1996      
                                          ------------     -----------
                                                                        
Revenues                                    $ 2,234,552     $   373,619  
Cost of revenues                              1,077,512         336,840  
                                            -----------     -----------
   Gross margin                               1,157,040          36,779  
                                                                        
                                                                        
Operating expenses:                                                     
   Research and development                   4,386,856       2,692,234 
   Selling, general and administrative        3,695,671       2,038,176 
                                             ----------      ----------
                                              8,082,527       4,730,410 
                                                                        
Loss from operations                         (6,925,487)     (4,693,631) 
                                                                        
Interest income                                 745,666       1,108,053 
Interest expense                                 (6,485)        (16,496) 
                                            ------------    ------------
Net loss                                    $(6,186,306)    $(3,602,074) 
                                            ============    ============ 
                                                                        
Net loss per share                               $(0.45)         $(0.30) 
                                                 =======         =======
                                                                        
Shares used in computation of                                           
   net loss per share                        13,771,635      12,122,092 
                                             ===========     ===========
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
See accompanying notes.                                                 

Page 2
<PAGE>
                  
                    NEOPATH, INC.
                                                                             
              STATEMENTS OF CASH FLOWS
                     (Unaudited)
                    
<TABLE>
<CAPTION>
                                                                                    
                                                                                    
                                                            Three months ended
                                                                 March 31,
                                                            1997            1996
                                                        ------------    ------------
<S>                                                     <C>             <C>
Operating activities                                                              
Net loss                                                $ (6,186,306)   $ (3,602,074)
Adjustments to reconcile net loss to net cash                                       
 used in operating activities:                                                      
   Depreciation and amortization                             758,877         226,250
   Deferred compensation                                      74,246          60,820
   Accrued interest on securities available-for-sale         458,950         182,384
   Net change in operating accounts:                                                
     Accounts receivable                                  (1,097,546)       (206,217)
     Inventories and fee-per-use systems                  (2,715,121)     (2,021,931)
     Accounts payable and accrued liabilities                494,056         352,249
   Other                                                    (372,473)       (217,444)
                                                        -------------    ------------
Net cash used in operating activities                     (8,585,317)     (5,225,963)
                                                                                    
                                                                                    
Investing activities                                                                
Purchases of securities available-for-sale                (1,101,093)    (67,508,365)
Maturities of securities available-for-sale               11,500,000      11,780,541
Additions to property and equipment                         (305,796)       (428,547)
Other                                                         (1,040)         73,639
                                                         ------------   -------------
Net cash provided by (used in) investing activities       10,092,071     (56,082,732)
                                                                                    
Financing activities                                                                
Issuance of common stock, net                                      -      61,740,351
Exercise of stock options and warrants                     3,623,425       1,350,765
Principal payments on obligations under capital leases       (21,956)        (57,555)
                                                        -------------   -------------
Net cash provided by financing activities                  3,601,469      63,033,561
                                                        -------------   -------------
Net increase in cash and cash equivalents                  5,108,223       1,724,866
Cash and cash equivalents:                                                          
   Beginning of period                                     7,871,401       4,150,923
                                                        ------------    -------------
   End of period                                        $ 12,979,624    $  5,875,789
                                                        ============    =============
                                                                                    
Noncash transactions and supplemental disclosures                                   
Cash paid for interest                                  $      6,485    $     16,496
Inventories transferred to fee-per-use systems               802,834       1,499,496
Inventories transferred to property and equipment            330,174               -
                                                                                    
</TABLE>
   
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.  (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, 1996 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, 1997,  are
not  necessarily  indicative of results to be expected for the  entire  year
ending  December  31,  1997  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, 1996.

Note 2 - Revenue Recognition

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

Note 3 - Recently Issued Accounting Standard

      In  February  1997,  the Financial Accounting Standards  Board  issued
Statement No. 128, "Earnings per Share," which is required to be adopted  on
December  31,  1997.  The new Statement requires that companies  change  the
method  currently used to compute earnings per share and restate  all  prior
periods,  if necessary.  Under the new requirements for calculating  primary
earnings  per share, the dilutive effect of stock options will be  excluded.
Because  the  Company's stock options are not dilutive (due to net  losses),
the impact of Statement No. 128 on the Company's calculation of net loss per
share is not expected to be material.

Note 4 - Inventories

     Inventories consist of the following:

                                                                 
                               March 31, 1997   December 31, 1996
                               --------------   -----------------
     Raw materials             $   2,886,840        $   2,725,725
     Work-in-process               1,282,428              166,437
     Finished goods                3,054,759            2,749,752
                               -------------       --------------
                               $   7,224,027        $   5,641,914
                               =============       ==============
Page 4
<PAGE>
Note 5 -  Litigation

      On  July 15, 1996, Neuromedical Systems, Inc. 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. The Company believes it has  a  strong
position in this action and is defending itself vigorously.

      On  March  31,  1997, the Company filed a patent infringement  lawsuit
against  Neuromedical Systems, Inc. in the United States District Court  for
the   Western   District  of  Washington.   The  complaint  alleges   patent
infringement  and  seeks  preliminary  and  permanent  injunctions   against
Neuromedical Systems, Inc.

Note 6 -  Reclassifications

     Certain prior-period amounts have been reclassified to conform to the
current-period presentation.

Page 5
<PAGE>
Item  2.   Management's Discussion and Analysis of Financial  Condition  and
Results of Operations

Overview

      NeoPath,  Inc.  (the  "Company"  or "NeoPath")  develops  and  markets
products  that automate the interpretation of medical images.  The Company's
initial   products  are  two  automated  screening  systems  that  integrate
proprietary high-speed image processing computers, video imaging  technology
and  sophisticated  visual  intelligence software  to  capture  and  analyze
thousands of microscopic images from a Papanicolaou ("Pap") smear slide.  In
September  1995, the United States Food and Drug Administration (the  "FDA")
cleared for commercial use the Company's first product, the AutoPap  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 as normal.  The decision allows
AutoPap  QCs  to  be  used  in  meeting the federally  mandated  rescreening
requirement.

     NeoPath  is seeking FDA approval for the Company's second product,  the
AutoPap  Automatic  Pap  Screener System (the  "AutoPap  Screener"  and,  in
combination with the AutoPap QC, the "AutoPap System").  The Company  is  in
the  process of completing clinical studies involving over 30,000 cases that
support an amendment to the Company's Pre-Market Approval ("PMA") supplement
for  the  use  of the AutoPap Screener as a primary screener  of  Pap  smear
slides.   The Company will be analyzing the data from these clinical studies
and  plans  to  submit the amended PMA supplement to the FDA in 1997.  During
the first quarter of 1997, the Ministry of Health and Welfare in Japan
approved  the AutoPap System for sale as a primary screener.
     
     The  Company  is  compensated on either a  sale  or  fee-per-use  basis
(subject to certain license agreements and minimum payments).  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.   The fee-per-use program entails a significant capital commitment
since  the  Company retains ownership of the AutoPap Systems.  The  cost  of
each   AutoPap  System  is  reclassified  from  inventories  to  depreciable
equipment  upon  shipment to a fee-per-use customer site.   Such  equipment,
reflected  on  the  balance  sheet  under  "fee-per-use  systems,  net,"  is
depreciated  on  a  straight-line basis over a four-year period,  commencing
upon  commercial operation.  The Company's product placements have primarily
consisted  of fee-per-use contracts in the United States and sale  contracts
internationally.   The  Company anticipates that future  product  placements
will continue to consist of a mixture of fee-per-use and sale contracts.

Results of Operations

     The Company recorded $2.2 million in revenues for the first quarter  of
1997,  representing a significant increase from $374,000 recognized  in  the
first  quarter  of 1996, the quarter in which NeoPath recognized  its  first
product   revenues.   Revenues  increased  43  percent  from  $1.6   million
recognized  in the fourth quarter of 1996, due primarily to increased  sales
of  AutoPap  Systems in Japan, combined with an increase in U.S. fee-per-use
revenues.   AutoPap  Systems  are  sold  in  Japan  through  a  distribution
agreement with Nikon Corporation.
     
     The  Company's  gross  margin was 52 percent  for  the  first  quarter,
compared to gross margins of 41 percent in the fourth quarter of 1996 and 38
percent for all of 1996.  The primary components of cost of revenues include
depreciation  on fee-per-use systems, allocated service and  support  costs,
and, with regard to AutoPap Systems sold, the related manufacturing cost and
estimated  one-year warranty expense.  Gross margin is expected to fluctuate
depending  on  the  mix of fee-per-use and sale revenues,  as  well  as  the
continued development of the manufacturing, service and support functions.

      Research and development expenses for the three months ended March 31,
1997  increased $1.7 million to $4.4 million from the comparable  period  in
1996,  and  increased  $1.4 million from the fourth quarter  of  1996.   The
increases are primarily a result of the incremental third-party expenses
incurred in connection  with  clinical studies.  Research and development 
expenses are expected to remain at or near current levels in the second 

Page 6
<PAGE>
quarter, as a result of continuing clinical studies, and then decrease in the
third quarter of 1997.  Research and development expenses are then expected to
increase over time due to additional FDA submissions for future enhancements
to the AutoPap System.  Based on the uncertainty of the FDA approval process,
actual expenses may differ from the Company's expectations.

      Selling, general and administrative expenses for the first quarter  of
1997  increased $1.7 million to $3.7 million from the first quarter of 1996,
and  increased  $344,000  from the fourth quarter of  1996.   The  increases
reflect   the  Company's  continued  investment  in  marketing   and   sales
initiatives,  as  well  as  investments in the necessary  infrastructure  to
support continued placements of AutoPap Systems.

      Interest  income for the first quarter of 1997 decreased to  $746,000,
compared to $1.1 million for the comparable quarter in 1996 and $857,000  in
the  fourth  quarter  of  1996.  The decreases in interest  income  are  due
primarily  to  decreased cash equivalents and securities  available-for-sale
resulting from NeoPath's negative operating cash flow.

 Liquidity and Capital Resources

      The Company's cash, cash equivalents and securities available-for-sale
totaled  $52.5 million as of March 31, 1997, which represents a decrease  of
$5.9  million from December 31, 1996.  The decrease is a result of cash used
in  the  Company's  operations for the three months ended  March  31,  1997,
offset by the receipt of $3.6 million from the exercise of stock options and
warrants.

      During  the three months ended March 31, 1997, the Company  used  $8.6
million to fund operating activities, including $1.1 million for inventories
subsequently  classified  as either fee-per-use systems  or  transferred  to
property  and  equipment, and used $306,000 to purchase other  property  and
equipment.   During the comparable three-month period in 1996,  the  Company
used  $5.2  million in its operating activities, including $1.5 million  for
inventories subsequently classified as fee-per-use systems, and the  Company
purchased $429,000 of property and equipment.  The investment in fee-per-use
systems  is  expected to increase as the Company continues to place  AutoPap
Systems into commercial service under fee-per-use service contracts.

      The Company expects negative cash flow from operations to continue  at
least through 1997 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  the  AutoPap  Screener
clinical studies.  The Company currently estimates that its existing capital
resources  and  interest  income will enable it to  sustain  operations  for
approximately  the  next six quarters.  There can be no assurance,  however,
that  the  Company  will not be required to seek additional  capital  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,  if  the  requisite  regulatory approvals  are  obtained,  the  AutoPap
Screener; the adoption of the Company's fee-per-use program; the mix of fee-
per-use  and  sale  placements; 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 and clinical programs.

Factors Affecting Future Results and 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 results  to  differ 
materially from historical results or those anticipated.  The words  "plan,"
"expect,"  "anticipate,"  and similar expressions  identify  forward-looking
statements.  Readers are

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<PAGE>
cautioned  not to place undue reliance on these forward-looking  statements.
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, 1996.

Page 8
<PAGE>
Part II   OTHER INFORMATION

Item 1. Legal Proceedings

      On  July 15, 1996, Neuromedical Systems, Inc. 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. The Company believes it has  a  strong
position in this action and is defending itself vigorously.

      On  March  31,  1997, the Company filed a patent infringement  lawsuit
against  Neuromedical Systems, Inc. in the United States District Court  for
the   Western   District  of  Washington.   The  complaint  alleges   patent
infringement  and  seeks  preliminary  and  permanent  injunctions  against 
Neuromedical Systems, Inc.

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,
1997.

Page 9
<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 13, 1997                  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

Page 10
<PAGE>



                                NEOPATH, INC.
                                      
                              INDEX TO EXHIBITS



     Exhibit No.   Description
     ----------    ------------------------
     27            Financial Data Schedule

Page 11
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