FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                (X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)

                    OF THE SECURITIES EXCHANGE ACT OF 1934

              OR ( ) TRANSITION REPORT UNDER SECTION 13 or 15(d)

                    OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter ended March 31, 1997

Commission File Number 33-75056

                   SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
             (Exact name of registrant as specified in its charter)

      New York                                13-3729162
 (State or other jurisdiction of           (I.R.S. Employer
 incorporation or organization)             Identification No.)


                    c/o Smith Barney Futures Management Inc.
                           390 Greenwich St. - 1st Fl.
                            New York, New York 10013
              (Address and Zip Code of principal executive offices)


                                 (212) 723-5424
              (Registrant's telephone number, including area code)


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


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                  SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
                                   FORM 10-Q
                                     INDEX


                                                                        Page
                                                                       Number

PART I - Financial Information:

            Item 1.     Financial Statements:

                        Statement of Financial Condition at
                        March 31, 1997 and December 31, 1996.            3

                        Statement of Income and Expenses and
                        Partners' Capital for the three months
                        ended March 31, 1997 and 1996.                   4

                        Notes to Financial Statements                  5 - 8

            Item 2.     Management's Discussion and Analysis
                        of Financial Condition and Results of
                        Operations                                     9 - 10

PART II - Other Information                                              11


                                      2

<PAGE>

                                     PART I
                          ITEM 1. FINANCIAL STATEMENTS



                                                         
                   SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
                        STATEMENT OF FINANCIAL CONDITION



                                                      MARCH 31,     DECEMBER 31,
                                                        1997            1996
                                                    ------------    ------------
ASSETS:                                             (Unaudited)


Equity in commodity futures trading account:
  Cash and cash equivalents                         $168,794,171    $170,574,018
  Net unrealized appreciation on
    open futures contracts                             8,516,087       6,887,203
  Commodity options owned, at market
   value (cost $37,938 and $607,539, in
    1997 and 1996, respectively)                           6,725         442,696

                                                    ------------    ------------

                                                     177,316,983     177,903,917

Interest receivable                                      603,396         558,298

                                                    ------------    ------------

                                                    $177,920,379    $178,462,215

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

LIABILITIES AND PARTNERS' CAPITAL:

Liabilities:
 Accrued expenses:
  Commissions                                       $    831,108    $    831,169
  Management fees                                        411,260         412,599
  Other                                                   89,928         108,043
  Incentive fees                                         747,694       3,476,717
 Redemptions payable                                   2,491,393       2,005,213
 Commodity options written, at market value
    (premiums received $83,070)                                -          41,213

                                                    ------------    ------------
                                                       4,571,383       6,874,954

                                                    ------------    ------------
Partners' Capital:

General Partner, 2,048.9308 Unit
   equivalents outstanding in 1997 and 1996            2,670,781       2,561,901
Limited Partners, 130,938.0667 and
  135,181.6379 Units of Limited Partnership
  Interest outstanding in 1997 and 1996,
  respectively                                       170,678,215     169,025,360

                                                    ------------    ------------

                                                     173,348,996     171,587,261

                                                    ------------    ------------

                                                    $177,920,379    $178,462,215

                                                    ============    ============
See Notes to Financial Statements 



                                      3

<PAGE>

                   SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
             STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
                                   (UNAUDITED)


                                                THREE - MONTHS    THREE - MONTHS
                                                    ENDED             ENDED
                                                   MARCH 31,        MARCH 31,
                                                     1997             1996
                                                 -------------    --------------
Income:
  Net gains (losses) on trading of
    commodity futures:
    Realized gains (losses) on
      closed positions                           $   8,539,658    $    (842,886)
    Change in unrealized gains/losses on
      open positions                                 1,720,657       (8,831,850)
                                                 -------------    -------------

                                                    10,260,315       (9,674,736)
Less, brokerage commissions and clearing
  fees ($83,380 and $122,902, respectively)         (2,664,544)      (2,897,381)

                                                 -------------    -------------

  Net realized and unrealized gains (losses)         7,595,771      (12,572,117)


  Interest income                                    1,710,017        1,753,386

                                                 -------------    -------------

                                                     9,305,788      (10,818,731)

                                                 -------------    -------------

Expenses:

  Management fees                                    1,203,429        1,217,311
  Other  expense                                        49,159           88,619
  Incentive fees                                       747,694                -

                                                 -------------    -------------

                                                     2,000,282        1,305,930

                                                 -------------    -------------

  Net income (loss)                                  7,305,506      (12,124,661)

Additions                                                    -        2,035,483
Redemptions                                         (5,543,771)     (11,706,869)


                                                 -------------    -------------

Net increase (decrease) in
  Partners' capital                                  1,761,735      (21,796,047)

Partners' capital, beginning of period             171,587,261      194,190,428
                                                 -------------    -------------

Partners' capital, end of period                 $ 173,348,996    $ 172,394,381

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

Net asset value per Unit
   (132,986.9975 and 168,479.3926 Units
   outstanding at March 31, 1997 and
   1996, respectively)                           $    1,303.50    $    1,023.24

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

Net income (loss) per Unit of Limited
   Partnership Interest and General
   Partnership Unit equivalent                   $       53.14    $      (68.42)

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

See Notes to Financial Statements.



                                      4

<PAGE>



                  SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
                         NOTES TO FINANCIAL STATEMENTS
                                March 31, 1997
                                  (Unaudited)

1. General:

      Smith  Barney  Diversified  Futures  Fund L.P.  (the  "Partnership")  is a
limited partnership organized under the laws of the State of New York, on August
13, 1993 to engage in the  speculative  trading of a  diversified  portfolio  of
commodity interests including futures contracts,  options and forward contracts.
The  commodity  interests  that are traded by the  Partnership  are volatile and
involve  a high  degree  of  market  risk.  The  Partnership  commenced  trading
operations on January 12, 1994.

        Smith Barney Futures  Management  Inc. acts as the general  partner (the
"General Partner") of the Partnership. Smith Barney Inc. ("SB"), an affiliate of
the General Partner,  acts as commodity broker for the Partnership.  All trading
decisions  are made for the  Partnership  by Campbell & Company,  Inc.,  John W.
Henry & Company, Inc., Chesapeake Capital Corporation,  Abraham Trading Company,
Rabar Market Research, Inc. and AIS Futures Management, Inc. (collectively,  the
"Advisors").

      The accompanying financial statements are unaudited but, in the opinion of
management,  include  all  adjustments  (consisting  only  of  normal  recurring
adjustments)  necessary for a fair presentation of the  Partnership's  financial
condition  at March 31,  1997 and the  results of its  operations  for the three
months ended March 31, 1997 and 1996.  These  financial  statements  present the
results of interim periods and do not include all disclosures  normally provided
in annual financial statements.  It is suggested that these financial statements
be read in conjunction  with the financial  statements and notes included in the
Partnership's  annual  report on Form 10-K filed with  Securities  and  Exchange
Commission for the year ended December 31, 1996.

      Due to the nature of commodity trading,  the results of operations for the
interim  periods  presented  should not be considered  indicative of the results
that may be expected for the entire year.



                                      5

<PAGE>



                  SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
                         NOTES TO FINANCIAL STATEMENTS
                                  (continued)


2.   Net Asset Value Per Unit:

      Changes in net asset value per Unit for the three  months  ended March 31,
1997 and 1996, were as follows:

                                              THREE-MONTHS ENDED
                                                  MARCH 31
                                             1997          1996

Net realized and unrealized
 gains (losses)                           $   55.19     $   (70.97)
Interest income                               12.56           9.94
Expenses                                     (14.61)        ( 7.39)
                                          ----------     ----------

Increase (decrease) for period                53.14         (68.42)

Net Asset Value per Unit,
  beginning of period                      1,250.36       1,091.66
                                          ----------     ----------

Net Asset Value per Unit,
  end of period                           $1,303.50      $1,023.24
                                          ==========     ==========



3.  Trading Activities:

      The  Partnership  was formed for the  purpose  of trading  contracts  in a
variety of commodity interests,  including derivative financial  instruments and
derivative  commodity  instruments.  The  results of the  Partnership's  trading
activity are shown in the statements of income and expenses.

      The  Customer   Agreement   between  the  Partnership  and  SB  gives  the
Partnership the legal right to net unrealized gains and losses.

      All of the  commodity  interests  owned  by the  Partnership  are held for
trading purposes. The fair value of these commodity interests, including options
thereon,  at March 31, 1997 was $8,522,812 and the average fair value during the
three months then ended, based on monthly calculation, was $13,780,877.

4.   Financial Instrument Risk:

      The Partnership is party to financial  instruments with off- balance sheet
risk,  including  derivative  financial  instruments  and  derivative  commodity
instruments,  in the normal course of its business.  These financial instruments
include forwards, futures

                                      6

<PAGE>



and options,  whose value is based upon an underlying asset, index, or reference
rate, and generally  represent future commitments to exchange currencies or cash
flows,  to purchase or sell other  financial  instruments  at specific  terms at
specified future dates, or, in the case of derivative commodity instruments,  to
have a reasonable  possibility  to be settled in cash or with another  financial
instrument.  These instruments may be traded on an exchange or  over-the-counter
("OTC").  Exchange traded  instruments are  standardized and include futures and
certain  option  contracts.  OTC contracts are  negotiated  between  contracting
parties and include forwards and certain options.  Each of these  instruments is
subject to various risks similar to those  related to the  underlying  financial
instruments  including market and credit risk. In general,  the risks associated
with OTC  contracts  are greater  than those  associated  with  exchange  traded
instruments because of the greater risk of default by the counterparty to an OTC
contract.

      Market risk is the  potential  for  changes in the value of the  financial
instruments traded by the Partnership due to market changes,  including interest
and foreign  exchange rate movements and  fluctuations  in commodity or security
prices.  Market risk is directly impacted by the volatility and liquidity in the
markets in which the related underlying assets are traded.

      Credit risk is the possibility that a loss may occur due to the failure of
a counterparty to perform according to the terms of a contract. Credit risk with
respect to exchange traded instruments is reduced to the extent that an exchange
or  clearing  organization  acts  as a  counterparty  to the  transactions.  The
Partnership's  risk of loss in the event of  counterparty  default is  typically
limited to the amounts  recognized in the  statement of financial  condition and
not  represented  by the contract or notional  amounts of the  instruments.  The
Partnership has concentration  risk because the sole counterparty or broker with
respect to the Partnership's assets is SB.

      The General Partner monitors and controls the Partnership's  risk exposure
on a daily  basis  through  financial,  credit  and risk  management  monitoring
systems  and,   accordingly  believes  that  it  has  effective  procedures  for
evaluating and limiting the credit and market risks to which the  Partnership is
subject.  These  monitoring  systems allow the General Partner to  statistically
analyze actual  trading  results with risk adjusted  performance  indicators and
correlation statistics. In addition,  on-line monitoring systems provide account
analysis  of  futures,   forwards  and  options  positions  by  sector,   margin
requirements, gain and loss transactions and collateral positions.

      The  notional  or  contractual  amounts  of these  instruments,  while not
recorded in the financial  statements,  reflect the extent of the  Partnership's
involvement in these instruments. At March 31, 1997, the notional or contractual
amounts of the Partnership's

                                      7

<PAGE>



commitment  to  purchase  and  sell  these   instruments  was  $344,823,521  and
$1,258,341,081, respectively, as detailed below. All of these instruments mature
within  one  year  of  March  31,  1997.  However,  due  to  the  nature  of the
Partnership's business,  these instruments may not be held to maturity. At March
31, 1997, the fair value of the  Partnership's  derivatives,  including  options
thereon, was $8,522,812, as detailed below.

                                 NOTIONAL OR CONTRACTUAL
                                  AMOUNT OF COMMITMENTS
                               TO PURCHASE       TO SELL             FAIR VALUE
Currencies:
- Exchange Traded contracts  $ 22,189,840      $   89,080,665      $   98,733
- OTC Contracts                55,478,615          85,124,469        (766,933)
Energy                         14,203,779          18,907,399        (521,654)
Interest Rates U.S.                     0         324,516,241       2,404,849
Interest Rates Non U.S.        76,628,913         678,338,113         742,551
Grains                         58,856,993           1,782,480       5,077,801
Metals                         57,372,543          34,104,056         586,576
Indices                        38,211,998           9,376,219      (1,212,892)
Softs                          15,283,370          16,207,989       2,211,801
Livestock                       6,597,470             903,450         (98,020)
                            --------------       -------------     -----------

Totals                       $344,823,521      $1,258,341,081      $8,522,812
                             =============     ===============     ===========



                                            8

<PAGE>





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


Liquidity and Capital Resources

     The Partnership does not engage in the sale of goods or services.  Its only
assets are its equity in its commodity  futures trading  account,  consisting of
cash and cash equivalents,  net unrealized  appreciation  (depreciation) on open
futures  contracts and interest  receivable.  Because of the low margin deposits
normally required in commodity futures trading, relatively small price movements
may result in substantial  losses to the Partnership.  While substantial  losses
could lead to a decrease in liquidity,  no such losses occurred during the first
quarter of 1997.

     The  Partnership's  capital  consists of the capital  contributions  of the
partners as  increased  or  decreased  by gains or losses on  commodity  futures
trading,  expenses,  interest  income,  additions and  redemptions  of Units and
distributions of profits, if any.

     For the three months ended March 31, 1997,  Partnership  capital  increased
1.0% from $171,587,261 to $173,348,996.  This increase was attributable to a net
gain from operations of $7,305,506  which was partially offset by redemptions of
4,243.5712 units totaling  $5,543,771.  Future redemptions can impact the amount
of funds available for investments in commodity contract positions in subsequent
periods.

Results of Operations

     During the  Partnership's  first  quarter of 1997,  the net asset value per
Unit increased  4.2% from  $1,250.36 to $1,303.50,  as compared to a decrease of
6.3% in the first  quarter of 1996.  The  Partnership  experienced a net trading
gain  before   commissions  and  expenses  in  the  first  quarter  of  1997  of
$10,260,315.  Gains  were  recognized  in the  trading of  commodity  futures in
currencies,  grains, softs, indices, metals and U.S. interest rates. These gains
were partially  offset by losses  recognized in the trading of energy  products,
livestock and non-U.S. interest rates. The Partnership experienced a net trading
loss before commissions and expenses in the first quarter of 1996 of $9,674,736.
Losses were recognized in indices,  metals, energy and agricultural products and
were partially offset by gains in currencies and interest rates.

     Commodity futures markets are highly volatile. Broad price fluctuations and
rapid  inflation  increase  the risks  involved in commodity  trading,  but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of

                                      9

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major price trends and the ability of the Advisors to identify  correctly  those
price  trends.  Price trends are  influenced  by, among other  things,  changing
supply and demand relationships, weather, governmental, agricultural, commercial
and trade  programs and  policies,  national  and  international  political  and
economic  events and changes in interest rates. To the extent that market trends
exist and the Advisors are able to identify  them,  the  Partnership  expects to
increase capital through operations.

     Interest income on 80% of the Partnership's daily equity maintained in cash
was earned on the monthly average 30-day Treasury bill rate. Interest income for
the three  months  ended March 31, 1997  decreased by $43,369 as compared to the
corresponding  period in 1996. The decrease in interest  income is primarily due
to the effect of redemptions on the Partnership's equity maintained in cash.

     Brokerage  commissions are calculated on the  Partnership's net asset value
as of the last day of each  month  and,  therefore,  vary  according  to trading
performance  and  redemptions.  Commissions for the three months ended March 31,
1997 decreased by $232,837, as compared to the corresponding period in 1996.

     Management  fees are  calculated  on the portion of the  Partnership's  net
asset value  allocated to each  Advisor at the end of the month and,  therefore,
are affected by trading  performance  and  redemptions.  Management fees for the
three  months  ended  March 31,  1997  decreased  by $13,882 as  compared to the
corresponding period in 1996.

     Incentive  fees are  based on the new  trading  profits  generated  by each
Advisor at the end of the quarter, as defined in the advisory agreements between
the  Partnership,  the General  Partner and each  Advisor.  Trading  performance
resulted  in  incentive  fees for the  three  months  ended  March  31,  1997 of
$747,694. No incentive fees were earned for the corresponding period in 1996.

                                      10

<PAGE>




                           PART II OTHER INFORMATION

Item 1.     Legal Proceedings - None

Item 2.     Changes in Securities - None

Item 3.     Defaults Upon Senior Securities - None

Item 4.     Submission of Matters to a Vote of Security Holders -
            None

Item 5.     Other Information - None

Item 6.     (a) Exhibits - None

            (b) Reports on Form 8-K - None




                                      11


<PAGE>


                                   SIGNATURES
  
        Pursuant to the  requirements  of Section 13 or 15 (d) 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.

SMITH  BARNEY DIVERSIFIED FUTURES FUND L.P.


By:     Smith Barney Futures Management Inc.
  (General Partner)

By:     /s/ David J. Vogel, President
  David J. Vogel, President

Date:   5/12/97


        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.

By:     Smith Barney Futures Management Inc.
       (General Partner)


By:     /s/ David J. Vogel, President
        David J. Vogel, President


Date:   5/12/97

By     /s/ Daniel A. Dantuono
       Daniel A. Dantuono
       Chief Financial Officer and
       Director

Date:  5/12/97


                                       12