UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X]  Quarterly  Report  Pursuant  to Section 13 or 15(d) of the  Securities
Exchange Act of 1934

For the period ended September 30, 1997
                     ------------------

                                       or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]

For the transition period from       to 
                               ------  -------


Commission File Number 0-13479
                       -------

                                PS PARTNERS III, LTD.
             (Exact name of registrant as specified in its charter)
             -------------------------------------------------------


    California                                            95-3920904
-------------------------------          --------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)


   701 Western Avenue
   Glendale, California                                          91201-2394
----------------------------------------                ------------------------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code:  (818) 244-8080
                                                     --------------
 

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
                                       --   --
<PAGE>
                                      INDEX


PART I.   FINANCIAL INFORMATION

         Condensed consolidated balance sheets at September 30, 1997
               and December 31, 1996                                       2

         Condensed consolidated statements of income for the three
              and nine months ended September 30, 1997 and 1996            3
 
         Condensed consolidated statements of cash flows for the
              nine months ended September 30, 1997 and 1996              4-5

         Notes to condensed consolidated financial statements            6-7

         Management's discussion and analysis of financial condition
              and results of operations                                 8-11

PART II.  OTHER INFORMATION

         (Items 1 through 5 are not applicable)

         Item 6 - Exhibits and Reports on Form 8-K                        12


<PAGE>
<TABLE>
<CAPTION>
                              PS PARTNERS III, LTD.
                      CONDENSED CONSOLIDATED BALANCE SHEETS



                                                                                  September 30,      December 31,
                                                                                       1997              1996
                                                                                ------------------------------------
                                                                                   (Unaudited)
                                     ASSETS


<S>                                                                                   <C>                  <C>      
Cash and cash equivalents                                                             $ 1,176,000          $ 529,000

Rent and other receivables                                                                124,000            123,000

Real estate facilities, at cost:
   Land                                                                                13,857,000         15,392,000
   Buildings and equipment                                                             68,529,000         75,323,000
                                                                                ------------------------------------
                                                                                       82,386,000         90,715,000

   Less accumulated depreciation                                                      (34,201,000)       (35,783,000)
                                                                                ------------------------------------
                                                                                       48,185,000         54,932,000

Investment in real estate entity                                                        5,677,000                  -

Other assets                                                                              143,000            275,000
                                                                                ------------------------------------

                                                                                     $ 55,305,000       $ 55,859,000
                                                                                ====================================


                        LIABILITIES AND PARTNERS' EQUITY


Accounts payable                                                                        $ 797,000          $ 894,000

Advance payments from renters                                                             466,000            511,000

Minority interest in general partnerships                                              28,305,000         28,297,000

Partners' equity:
   Limited partners' equity, $500 per unit, 128,000
      units authorized, issued and outstanding                                         25,396,000         25,812,000
   General partner's equity                                                               341,000            345,000
                                                                                ------------------------------------

Total partners' equity                                                                 25,737,000         26,157,000
                                                                                ------------------------------------

                                                                                     $ 55,305,000       $ 55,859,000
                                                                                ====================================

</TABLE>
                             See accompanying notes.
                                        2
<PAGE>
<TABLE>
<CAPTION>

                              PS PARTNERS III, LTD.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)


                                                          Three Months Ended                 Nine Months Ended
                                                             September 30,                     September 30,
                                                   ---------------------------------------------------------------------
                                                         1997             1996             1997              1996
                                                   ---------------------------------------------------------------------
REVENUE:
<S>                                                    <C>              <C>             <C>               <C>         
Rental income                                          $ 3,929,000      $ 4,028,000     $ 11,466,000      $ 11,876,000
Equity in income of real estate entity                      91,000                -          268,000                 -
Interest income                                             14,000            6,000           29,000            16,000
                                                   ---------------------------------------------------------------------
                                                         4,034,000        4,034,000       11,763,000        11,892,000
                                                   ---------------------------------------------------------------------

COSTS AND EXPENSES:

Cost of operations                                       1,247,000        1,318,000        3,785,000         3,872,000
Management fees                                            236,000          239,000          688,000           705,000
Depreciation and amortization                              838,000          891,000        2,481,000         2,640,000
Administrative                                              41,000           40,000          119,000           119,000
                                                   ---------------------------------------------------------------------
                                                         2,362,000        2,488,000        7,073,000         7,336,000
                                                   ---------------------------------------------------------------------

Income before minority interest                          1,672,000        1,546,000        4,690,000         4,556,000

Minority interest in income                               (741,000)        (810,000)      (2,110,000)       (2,404,000)
                                                   ---------------------------------------------------------------------

NET INCOME                                               $ 931,000        $ 736,000      $ 2,580,000       $ 2,152,000
                                                   =====================================================================

Limited partners' share of net income
   ($17.63 per unit in 1997 and $13.55
   per unit in 1996)                                                                     $ 2,257,000       $ 1,735,000
General partner's share of net income                                                        323,000           417,000
                                                                                     -----------------------------------
                                                                                         $ 2,580,000       $ 2,152,000
                                                                                     ===================================

</TABLE>
                             See accompanying notes.
                                        3
<PAGE>
<TABLE>
<CAPTION>
                              PS PARTNERS III, LTD.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


                                                                                    Nine Months Ended
                                                                                      September 30,
                                                                          ---------------------------------------
                                                                                 1997                1996
                                                                          ---------------------------------------

Cash flows from operating activities:
<S>                                                                              <C>                 <C>        
   Net income                                                                    $ 2,580,000         $ 2,152,000

   Adjustments to reconcile net income to net cash
       provided by operating activities

       Depreciation and amortization                                               2,481,000           2,640,000
       Increase in rent and other receivables                                         (1,000)            (56,000)
       Decrease (increase) in other assets                                           132,000             (64,000)
       Decrease in accounts payable                                                  (97,000)            (59,000)
       Decrease in advance payments from renters                                     (45,000)            (27,000)
       Equity income in real estate entity                                          (268,000)                  -
       Minority interest in income                                                 2,110,000           2,404,000
                                                                          ---------------------------------------

         Total adjustments                                                         4,312,000           4,838,000
                                                                          ---------------------------------------

         Net cash provided by operating activities                                 6,892,000           6,990,000
                                                                          ---------------------------------------

Cash flows used in investing activities:

   Investment in real estate entity                                                  (11,000)                  -
   Additions to real estate facilities                                            (1,132,000)           (757,000)
                                                                          ---------------------------------------

         Net cash used in investing activities                                    (1,143,000)           (757,000)
                                                                          ---------------------------------------

Cash flows used in financing activities:

   Distributions to holder of minority interest                                   (2,102,000)         (2,229,000)
   Distributions to partners                                                      (3,000,000)         (4,000,000)
                                                                          ---------------------------------------

         Net cash used in financing activities                                    (5,102,000)         (6,229,000)
                                                                          ---------------------------------------

Net increase in cash and cash equivalents                                            647,000               4,000

Cash and cash equivalents at the beginning of the period                             529,000             455,000
                                                                          ---------------------------------------

Cash and cash equivalents at the end of the period                               $ 1,176,000           $ 459,000
                                                                          =======================================

</TABLE>
                             See accompanying notes.
                                        4
<PAGE>
<TABLE>
<CAPTION>
                              PS PARTNERS III, LTD.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                   (Continued)


                                                                                      Nine Months Ended
                                                                                        September 30,
                                                                             ------------------------------------
                                                                                   1997              1996
                                                                             ------------------------------------


Supplemental schedule of noncash investing and financing activities:


<S>                                                                               <C>                        <C>
   Investment in real estate entity                                               $ (5,399,000)              $ -

   Transfer of real estate facilities for interest in real estate entity             5,399,000                 -




                             See accompanying notes.
                                        5
</TABLE>
<PAGE>
                              PS PARTNERS III, LTD.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997
                                   (UNAUDITED)




1.        The accompanying unaudited condensed consolidated financial statements
          have  been  prepared  pursuant  to the rules  and  regulations  of the
          Securities and Exchange  Commission.  Certain information and footnote
          disclosures  normally  included in  financial  statements  prepared in
          accordance  with generally  accepted  accounting  principles have been
          condensed or omitted pursuant to such rules and regulations,  although
          management believes that the disclosures contained herein are adequate
          to make the  information  presented not  misleading.  These  unaudited
          condensed   consolidated   financial  statements  should  be  read  in
          conjunction with the financial  statements and related notes appearing
          in the Partnership's Form 10-K for the year ended December 31, 1996.

2.        In the opinion of management,  the  accompanying  unaudited  condensed
          consolidated financial statements reflect all adjustments,  consisting
          of only normal accruals, necessary to present fairly the Partnership's
          financial  position at September  30, 1997,  the results of operations
          for the three and nine months  ended  September  30, 1997 and 1996 and
          cash flows for the nine months then ended.

3.        The  results  of  operations  for the  three  and  nine  months  ended
          September 30, 1997 are not necessarily indicative of the results to be
          expected for the full year.

4.        Effective  January  2,  1997,  Public  Storage,   Inc.  ("PSI"),   the
          Partnership's  general  partner,  formed  a new  private  real  estate
          investment trust named American Office Park Properties,  Inc. ("AOPP")
          which  will  focus  its  investment   efforts  on  the  ownership  and
          management of commercial properties (also referred to as business park
          facilities).  In  connection  with  the  formation  of  AOPP,  PSI and
          affiliated  partnerships  transferred commercial properties to a newly
          created   partnership   underlying   AOPP  in  exchange   for  limited
          partnership   interests   (AOPP   and   the   underlying   partnership
          collectively   referred  to  as  the  "New  REIT").   The  Partnership
          participated  in the initial  transaction by exchanging its commercial
          property,  which was owned  jointly by the  Partnership  and PSI,  for
          285,000 limited  partnership  units,  which represented  approximately
          4.3% of the initial capitalization of the partnership underlying AOPP.

          The number of limited  partnership  units received by the  Partnership
          was  based on the  relative  fair  market  value of the  Partnership's
          commercial  property  exchanged compared to the aggregate of all other
          real estate  assets  exchanged  for limited  partnership  units in the
          underlying  partnership.  The Partnership's limited partnership units,
          pursuant to the terms and conditions of the governing  documents,  are
          convertible into shares of common stock of AOPP.

                                       6
<PAGE>
                             PS PARTNERS III, LTD.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997
                                   (UNAUDITED)


4.        (Continued)
          The general  partners  believe that the  concentration  of PSI's,  the
          Partnership's  and affiliate  entities'  commercial  properties into a
          single  entity will create a vehicle  which should  facilitate  future
          growth  in  this  segment  of  the  real  estate  industry.  PSI,  the
          Partnership and the affiliates  transferring real estate assets to the
          New REIT  will  participate  in the  growth  through  their  ownership
          interests in the New REIT.

          The  Partnership  accounts  for its  investment  in New REIT using the
          equity method of accounting;  accordingly,  equity in earnings of real
          estate entity, as reflected on the  Partnership's  statement of income
          for the three and nine months ended  September 30, 1997,  reflects the
          Partnership's  pro rata  share of the  earnings  of the New REIT.  The
          investment was initially  recorded at the Partnership's net book value
          of  its  property   exchanged  for  limited   partnership  units.  The
          investment is  subsequently  adjusted for the  Partnership's  pro rata
          share of income and distributions  from the underlying  partnership of
          the New REIT.


                                       7
<PAGE>

                              PS PARTNERS III, LTD.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



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

THREE MONTHS ENDED  SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED  SEPTEMBER
30, 1996:

     The  Partnership's net income for the three months ended September 30, 1997
was $931,000 compared to $736,000 for the three months ended September 30, 1996,
representing an increase of $195,000,  or 27%. Excluding the 1996 operations for
the  Partnership's  business  park  facilities as compared to the 1997 equity in
income of real estate  entity,  the increase is primarily  due to an increase in
the  Partnership's  mini-warehouse  operations,  combined  with  a  decrease  in
minority interest in income for those properties held in joint venture with PSI.

     Rental  income  for  the   Partnership's   mini-warehouse   operations  was
$3,929,000  compared to $3,791,000 for the three months ended September 30, 1997
and 1996,  respectively,  representing  an  increase  of  $138,000,  or 4%.  The
increase in rental income was primarily  attributable to increased rental rates.
The  monthly  average  realized  rent per  square  foot  for the  mini-warehouse
facilities  was $.59  compared to $.56 for the three months ended  September 30,
1997 and  1996,  respectively.  The  weighted  average  occupancy  levels at the
mini-warehouse  facilities  remained  stable at 92% for the three  months  ended
September 30, 1997 and 1996.  Cost of  operations  (including  management  fees)
increased  $42,000,  or 3%, to $1,483,000  from  $1,441,000 for the three months
ended  September  30, 1997 and 1996,  respectively.  The increase was  primarily
attributable to increases in advertising and property tax expenses. Accordingly,
for the Partnership's  mini-warehouse operations,  property net operating income
increased by $96,000 from  $2,350,000 to  $2,446,000  for the three months ended
September 30, 1996 and 1997, respectively.

     Effective January 2, 1997, Public Storage,  Inc. ("PSI"), the Partnership's
general  partner,  formed a new  private  real  estate  investment  trust  named
American Office Park Properties,  Inc.  ("AOPP") which will focus its investment
efforts on the ownership and management of commercial properties.  In connection
with  the  formation  of  AOPP,  PSI  and  affiliated  partnerships  transferred
commercial properties to a newly created partnership underlying AOPP in exchange
for  limited  partnership   interests  (AOPP  and  the  underlying   partnership
collectively referred to as the "New REIT"). The Partnership participated in the
initial  transaction  by exchanging  its  commercial  property,  which was owned
jointly by the Partnership and PSI, for 285,000 limited partnership units, which
represented  approximately 4.3% of the initial capitalization of the partnership
underlying AOPP.

     The  Partnership  accounts for its  investment in New REIT using the equity
method of accounting. The following table summarizes the Partnership's equity in
earnings  from  its  investment  in the New  REIT  for the  three  months  ended
September  30, 1997  compared to the  operation of the  exchanged  business park
facility for the three months ended September 30, 1996:

<PAGE>

                                               Three Months Ended September 30,
                                               --------------------------------
                                                   1997                  1996
                                               ---------------    -------------
Equity in earnings of real estate entity       $  91,000           $         -
Rental income                                          -               237,000
Cost of operations                                     -               116,000
                                               ---------------    -------------
Net operating income                              91,000               121,000
Depreciation                                           -               102,000
                                               ---------------    -------------
                                               $  91,000             $  19,000
                                               ===============    =============


     Depreciation   and   amortization   attributable   to   the   Partnership's
mini-warehouse  facilities  increased  $49,000 from $789,000 to $838,000 for the
three months ended September 30, 1996 and 1997, respectively.  This increase was
primarily  attributable to the depreciation of capital  expenditures made during
1996 and 1997.

     Minority  interest in income  decreased  $69,000,  or 9%, to $741,000  from
$810,000 for the three months ended  September 30, 1997 and 1996,  respectively.
This decrease was primarily  attributable to the allocation of depreciation  and
amortization  expense  (pursuant to the  partnership  agreement  with respect to
those  real  estate  facilities  which  are  jointly  owned  with PSI) to PSI of
$147,000 for the three months ended  September  30, 1997 compared to $65,000 for
the same period in 1996,  partially  offset by an increase in net income (net of
depreciation)  for the  Partnership's  real estate facilities owned jointly with
PSI.

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996:

     The  Partnership's  net income for the nine months ended September 30, 1997
was $2,580,000  compared to $2,152,000  for the nine months ended  September 30,
1996,  representing  an  increase  of  $428,000,  or  20%.  Excluding  the  1996
operations  for the  Partnership's  business park  facilities as compared to the
1997 equity in income of real estate entity,  the increase is primarily due to a
decrease  in  minority  interest  in income for those  properties  held in joint
venture with PSI, combined with an increase in the Partnership's  mini-warehouse
operations.

     Rental  income  for  the   Partnership's   mini-warehouse   operations  was
$11,466,000 compared to $11,132,000 for the nine months ended September 30, 1997
and 1996,  respectively,  representing  an  increase  of  $334,000,  or 3%.  The
increase in rental income was primarily  attributable to increased rental rates,
partially  offset by decreased  average  occupancy  levels.  The monthly average
realized  rent  per  square  foot  for the  mini-warehouse  facilities  was $.58
compared  to $.56  for the nine  months  ended  September  30,  1997  and  1996,
respectively.  The  weighted  average  occupancy  levels  at the  mini-warehouse
facilities  decreased  from 91% to 90% for the nine months ended  September  30,
1996 and 1997,  respectively.  Cost of operations  (including  management  fees)
increased $218,000, or 5%, to $4,473,000 from $4,255,000 for the nine months


                                       9
<PAGE>

ended  September  30, 1997 and 1996,  respectively.  The increase was  primarily
attributable to increases in advertising, property tax, repairs and maintenance,
and management fee expenses.  Accordingly,  for the Partnership's mini-warehouse
operations,  property net operating income increased by $116,000 from $6,877,000
to  $6,993,000  for  the  nine  months  ended   September  30,  1996  and  1997,
respectively.

     The following table  summarizes the  Partnership's  equity in earnings from
its  investment  in the New REIT for the nine months  ended  September  30, 1997
compared to the operation of the  exchanged  business park facility for the nine
months ended September 30, 1996:

                                                 Nine Months Ended September 30,
                                                 -------------------------------
                                                         1997            1996
                                                 -------------------------------
Equity in earnings of real estate entity            $  268,000     $         -
Rental income                                                -         744,000
Cost of operations                                           -         322,000
                                                 -------------------------------
Net operating income                                   268,000         422,000
Depreciation                                                 -         306,000
                                                 -------------------------------
                                                    $  268,000      $  116,000
                                                 ===============================


     Depreciation   and   amortization   attributable   to   the   Partnership's
mini-warehouse  facilities  increased $147,000 from $2,334,000 to $2,481,000 for
the nine months ended September 30, 1996 and 1997,  respectively.  This increase
was primarily  attributable  to the  depreciation of capital  expenditures  made
during 1996 and 1997.

     Minority  interest in income was  $2,110,000 in 1997 compared to $2,404,000
in 1996,  representing  a  decrease  of  $294,000,  or 12%.  This  decrease  was
primarily  attributable  to the  allocation  of  depreciation  and  amortization
expense (pursuant to the partnership agreement with respect to those real estate
facilities  which are jointly  owned with PSI) to PSI of  $420,000  for the nine
months  ended  September  30, 1997  compared to $150,000  for the same period in
1996.

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

     The  Partnership  has adequate  sources of cash to finance its  operations,
both on a short-term and long-term  basis,  primarily from internally  generated
cash from property operations and cash reserves.  Cash generated from operations
($6,892,000 for the nine months ended September 30, 1997) has been sufficient to
meet all current obligations of the Partnership.

     During  1997,  the  Partnership  anticipates  approximately  $1,599,000  of
capital  improvements (of which $559,000  represents PSI's joint venture share).
The anticipated increase in capital improvements in 1996 is mainly due to a 10

                                       10
<PAGE>

program,  which the  Partnership's  property  manager  commenced during 1995, to
enhance  the  visual   appearance  of  the   mini-warehouse   facilities.   Such
enhancements include new signs,  exterior color schemes, and improvements to the
rental offices.  This program continued in 1997. Total capital improvements were
$1,132,000  for the nine  months  ended  September  30,  1997 of which  $806,000
represents the Partnership's share.

     The  Partnership  paid  distributions  to the limited and general  partners
totaling  $2,673,000  ($20.88 per unit) and $327,000,  respectively,  during the
first nine months of 1997. Future  distribution  rates may be adjusted to levels
which are supported by operating  cash flow after capital  improvements  and any
other necessary obligations.

                                       11
<PAGE>

                           PART II. OTHER INFORMATION

ITEMS 1 through 5 are not applicable.

Item 6   Exhibits and Reports on Form 8-K

         (a)      The following Exhibits are included herein:

                  (27)     Financial Data Schedule

         (b)      Reports on Form 8-K

                  None

                                   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.

                              DATED:  November 13, 1997
                                      PS PARTNERS III, LTD.
                              BY:     Public Storage, Inc.
                                      General Partner

                              BY:     /s/ John Reyes
                                      -----------------------
                                      Senior Vice President and Chief Financial
                                        Officer of Public Storage, Inc.
                                        (principal financial and accounting
                                         officer)
     
                                       12