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, 1996
                     ------------------
                                       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
     incorporation or organization)                    Identification Number)


           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, 1996
   and December 31, 1995                                                      2

 Condensed consolidated statements of income for the three and nine
   months ended September 30, 1996 and 1995                                   3

 Condensed consolidated statements of cash flows for the nine
   months ended September 30, 1996 and 1995                                   4

 Notes to condensed consolidated financial statements                         5

 Management's discussion and analysis of financial condition
   and results of operations                                                6-8

PART II.  OTHER INFORMATION

 (Items 1 through 5 are not applicable)

 Item 6 - Exhibits and Reports on Form 8-K                                    9


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




                                                                                  September 30,          December 31,
                                                                                      1996                   1995
                                                                               --------------------   -------------------
                                                                                   (Unaudited)
                                     ASSETS


<S>                                                                              <C>                      <C>           
       Cash and cash equivalents                                                 $         459,000        $      455,000
                                                                                                           
       Rent and other receivables                                                          155,000                99,000 
                                                                                

       Real estate facilities, at cost:
            Land                                                                        15,392,000            15,392,000
            Buildings and equipment                                                     74,852,000            74,095,000
                                                                               --------------------   -------------------
                                                                                        90,244,000            89,487,000

            Less accumulated depreciation                                              (34,882,000)          (32,242,000)
                                                                               --------------------   -------------------
                                                                                        55,362,000            57,245,000

       Other assets
                                                                                           243,000               179,000
                                                                               --------------------   -------------------

                                                                                   $    56,219,000        $   57,978,000
                                                                               ====================   ===================


                          LIABILITIES AND PARTNERS' EQUITY


       Accounts payable                                                          $         874,000       $       933,000
                                                                                                          
       Advance payments from renters                                                       488,000               515,000
                                    
       Minority interest in general partnerships                                        28,358,000            28,183,000
                                                                                                  
       Partners' equity:
            Limited partners' equity, $500 per unit, 128,000
                 units authorized, issued and outstanding                               26,150,000            27,980,000
            General partner's equity                                                       349,000               367,000
                                                                               --------------------   -------------------
       Total partners' equity                                                           26,499,000            28,347,000
                                                                               --------------------   -------------------
                                                                                   $    56,219,000        $   57,978,000
                                                                               ====================   ===================

</TABLE>
                             See accompanying notes.
                                        2

<PAGE>
<TABLE>
                              PS PARTNERS III, LTD.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)


<CAPTION>

                                                               Three Months Ended                    Nine Months Ended
                                                                 September 30,                         September 30,
                                                       -----------------------------------   -----------------------------------
                                                             1996              1995               1996               1995
                                                       -----------------  ----------------   ----------------  -----------------

       REVENUE:

<S>                                                        <C>               <C>               <C>                <C>          
       Rental income                                       $  4,028,000      $  3,902,000      $  11,876,000      $  11,389,000
       Interest income                                            6,000            26,000             16,000             85,000
                                                       -----------------  ----------------   ----------------  -----------------
                                                              4,034,000         3,928,000         11,892,000         11,474,000
                                                       -----------------  ----------------   ----------------  -----------------

       COSTS AND EXPENSES:

       Cost of operations                                     1,318,000         1,239,000          3,872,000          3,697,000
       Management fees                                          239,000           231,000            705,000            676,000
       Depreciation and amortization                            891,000           861,000          2,640,000          2,499,000
       Administrative                                            40,000            33,000            119,000            152,000
                                                       -----------------  ----------------   ----------------  -----------------
                                                              2,488,000         2,364,000          7,336,000          7,024,000
                                                       -----------------  ----------------   ----------------  -----------------

       Income before minority interest                        1,546,000         1,564,000          4,556,000          4,450,000
                                      
       Minority interest in income                             (810,000)         (815,000)        (2,404,000)        (2,344,000)
                                                       -----------------  ----------------   ----------------  -----------------

       NET INCOME                                        $      736,000     $     749,000      $   2,152,000      $   2,106,000
                                                       =================  ================   ================  =================

       Limited partners' share of net income
            ($13.55 per unit in 1996 and $12.02
            per unit in 1995)                                                                  $   1,735,000      $   1,539,000
       General partner's share of net income                                                         417,000            567,000
                                                                                             ----------------  -----------------
                                                                                               $   2,152,000      $   2,106,000
                                                                                             ================  =================

</TABLE>
                             See accompanying notes.
                                        3
<PAGE>
<TABLE>

                              PS PARTNERS III, LTD.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<CAPTION>



                                                                                           Nine Months Ended
                                                                                             September 30,
                                                                               -------------------------------------------
                                                                                     1996                      1995
                                                                               ------------------        -----------------

       CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                                                 <C>                      <C>         
            Net income                                                              $  2,152,000             $  2,106,000

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

                 Depreciation and amortization                                         2,640,000                2,499,000
                 Increase in rent and other receivables                                  (56,000)                 (12,000)
                 Increase in other assets                                                (64,000)                  (9,000)
                 (Decrease) increase in accounts payable                                 (59,000)                   96,000
                 Decrease in advance payments from renters                               (27,000)                 (34,000)
                 Minority interest in income                                           2,404,000                2,344,000
                                                                               ------------------        -----------------

                      Total adjustments                                                4,838,000                4,884,000
                                                                               ------------------        -----------------

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

       CASH FLOWS USED IN INVESTING ACTIVITIES:

            Additions to real estate facilities                                         (757,000)                (627,000)
                                                                               ------------------        -----------------

                      Net cash used in investing activities                             (757,000)                (627,000)
                                                                               ------------------        -----------------

       CASH FLOWS USED IN FINANCING ACTIVITIES:

            Distributions to holder of minority interest                              (2,229,000)              (2,307,000)
            Distributions to partners                                                 (4,000,000)              (5,502,000)
                                                                               ------------------        -----------------

                      Net cash used in financing activities                           (6,229,000)              (7,809,000)
                                                                               ------------------        -----------------

       Net increase (decrease) in cash and cash equivalents                                4,000              (1,446,000)
                                                                                
       Cash and cash equivalents at the beginning of the period                          455,000                2,131,000
                                                                               ------------------        -----------------

       Cash and cash equivalents at the end of the period                          $     459,000            $     685,000
                                                                               ==================        =================



</TABLE>
                             See accompanying notes.
                                        4
<PAGE>
                              PS PARTNERS III, LTD.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996
                                   (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, 1995.

 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, 1996, the results of operations for the
     three and nine months ended  September 30, 1996 and 1995 and cash flows for
     the nine months then ended.

 3.  The results of operations for the three and nine months ended September 30,
     1996 are not  necessarily  indicative of the results to be expected for the
     full year.


                                       5
<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, 1996 COMPARED TO THREE MONTHS ENDED  SEPTEMBER
30, 1995:

     The Partnership's net income was $736,000 and $749,000 for the three months
ended  September  30, 1996 and 1995,  respectively,  representing  a decrease of
$13,000.  The decrease was primarily due to an increase in depreciation  expense
combined with a decrease in interest  income,  partially  offset by increases in
property operating results.

     Interest  income  decreased  for the three months ended  September 30, 1996
over the same period in 1995 as a result of a decrease in average  invested cash
balances.

     Net property  income  (rental income less cost of operations and management
fees and excluding  depreciation)  for the three months ended September 30, 1996
increased $39,000, or 2%, as rental income increased $126,000,  or 3%, and costs
of operations  (including  management fees and excluding  depreciation  expense)
increased  $87,000,  or 6%, compared to the same period in 1995. The increase in
property  operations is due to  improvements  in the  mini-warehouse  facilities
partially offset by reduced operating results at the business park facility.

     Rental  income  for  the   Partnership's   mini-warehouse   operations  was
$3,791,000  compared to $3,661,000 for the three months ended September 30, 1996
and 1995,  respectively,  representing  an  increase  of  $130,000,  or 4%. This
increase was  primarily  attributable  to increased  rental  rates.  The monthly
average realized rent per square foot for the mini-warehouse facilities was $.56
compared  to $.55 for the  three  months  ended  September  30,  1996 and  1995,
respectively.  The  weighted  average  occupancy  levels  at the  mini-warehouse
facilities  remained stable at 92% for the three months ended September 30, 1996
and 1995. Cost of operations (including management fees) for the mini-warehouses
increased  $84,000,  or 6%, to $1,441,000  from  $1,357,000 for the three months
ended  September  30, 1996 and 1995,  respectively.  This increase was primarily
attributable to increases in advertising  and repairs and maintenance  expenses.
Accordingly,  for the  Partnership's  mini-warehouse  operations,  property  net
operating income increased $46,000, or 2%, from $2,304,000 to $2,350,000 for the
three months ended September 30, 1995 and 1996, respectively.

     Rental  income for the  Partnership's  business park  operations  decreased
$4,000,  or 2%, to $237,000 from  $241,000 for the three months ended  September
30, 1996 and 1995,  respectively.  This decrease was primarily attributable to a
decrease in the weighted average occupancy level,  partially offset by increased
rental  rates.  The  weighted  average  occupancy  levels at the  business  park
facility were 94% compared to 98% for the three months ended  September 30, 1996
and 1995,  respectively.  The monthly average  realized rent per square foot for
the business  park facility was $.56 compared to $.53 for the three months ended
September  30,  1996  and  1995,  respectively.  Cost of  operations  (including
management fees) for the business park increased $3,000, or 3%, to $116,000 from
$113,000 for the three months ended  September 30, 1996 and 1995,  respectively.
Accordingly,  for the  Partnership's  business  park  facilities,  property  net
operating  income  decreased  $7,000,  or 5%, to $121,000  from $128,000 for the
three months ended September 30, 1996 and 1995, respectively.

     Administrative  expenses increased $7,000 from $33,000 for the three months
ended  September 30, 1995 compared to $40,000 for the same period in 1996.  This
increase is partially attributable to an increase in accounting expense.

     Minority  interest in income decreased $5,000 to $810,000 from $815,000 for
the three months ended September 30, 1996 and 1995, respectively.  This decrease
was primarily  attributable  to an allocation of depreciation  and  amortization


                                       6
<PAGE>
                              PS PARTNERS III, LTD.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




expense (pursuant to the partnership agreement with respect to those real estate
facilities  which are  jointly  owned with PSI) to PSI of $65,000  for the three
months ended September 30, 1996 compared to $41,000 for the same period in 1995,
partially  offset  by  improved  operations  at the  Partnership's  real  estate
facilities for those properties owned jointly with PSI.


NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995:

     The  Partnership's  net income was  $2,152,000  and $2,106,000 for the nine
months ended September 30, 1996 and 1995, respectively, representing an increase
of $46,000,  or 2%. The  increase  was  primarily  due to  increases in property
operating results and decreases in administrative expenses,  partially offset by
decreases in interest income and increases in depreciation  expense and minority
interest in income for those properties held in joint venture with PSI.

     Interest income decreased for the nine months ended September 30, 1996 over
the same  period in 1995 as a result of a  decrease  in  average  invested  cash
balances.

     Net property  income  (rental income less cost of operations and management
fees and excluding  depreciation)  for the nine months ended  September 30, 1996
increased $283,000, or 4%, as rental income increased $487,000, or 4%, and costs
of operations  (including  management fees and excluding  depreciation  expense)
increased  $204,000,  or 5% compared to the same period in 1995. These increases
were due to improved  operating  results at the  mini-warehouse  facilities  and
business park facilities.

     Rental  income  for  the   Partnership's   mini-warehouse   operations  was
$11,132,000 compared to $10,692,000 for the nine months ended September 30, 1996
and 1995,  respectively,  representing  an  increase  of  $440,000,  or 4%. This
increase  was  primarily  attributable  to  increased  rental rates and weighted
average  occupancy   levels.   The  weighted  average  occupancy  level  at  the
mini-warehouse  facilities  was 91%  compared to 90% for the nine  months  ended
September 30, 1996 and 1995, respectively. The monthly average realized rent per
square foot for the mini-warehouse  facilities was $.56 compared to $.54 for the
nine months ended September 30, 1996 and 1995, respectively. Costs of operations
(including  management fees) for the mini-warehouses  increased $211,000, or 5%,
to $4,255,000  from  $4,044,000 for the nine months ended September 30, 1996 and
1995,  respectively.  This increase was primarily  attributable  to increases in
repairs and  maintenance,  advertising,  management  fees,  payroll,  and office
expenses. Accordingly, for the Partnership's mini-warehouse operations, property
net operating  income increased  $229,000,  or 3%, from $6,648,000 to $6,877,000
for the nine months ended September 30, 1995 and 1996, respectively.

     Rental  income for the  Partnership's  business park  operations  increased
$47,000,  or 7%, to $744,000 from  $697,000 for the nine months ended  September
30, 1996 and 1995, respectively.  This increase was primarily attributable to an
increase in rental rates.  The monthly average realized rent per square foot for
the business  park  facility was $.56 compared to $.52 for the nine months ended
September 30, 1996 and 1995, respectively. The weighted average occupancy levels
at the business park facilities remained stable at 97% for the nine months ended
September 30, 1996 and 1995. Cost of operations  (including management fees) for
the business  park  decreased  $7,000,  or 2%, to $322,000 from $329,000 for the
nine months ended September 30, 1996 and 1995,  respectively.  Accordingly,  for
the  Partnership's  business  park  facility,   property  net  operating  income
increased  by $54,000,  or 15%,  from  $368,000 to $422,000  for the nine months
ended September 30, 1995 and 1996, respectively.

     Administrative  expenses  decreased  $33,000  from  $152,000 to $119,000 in
1996.  This  decrease is primarily a result of  non-recurring  expenses in 1995,
totaling $44,000,  incurred in connection with environmental  assessments of the
Partnership's facilities.


                                       7
<PAGE>
                              PS PARTNERS III, LTD.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



     Minority interest in income increased $60,000 to $2,404,000 from $2,344,000
for the nine  months  ended  September  30,  1996 and 1995,  respectively.  This
increase was primarily  attributable to improved operations at the Partnership's
real estate  facilities for those properties  owned jointly with PSI,  partially
offset by an 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 $150,000 for the nine months ended  September
30, 1996 compared to $118,000 for the same period in 1995.


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
($6,990,000 for the nine months ended September 30, 1996) has been sufficient to
meet all current obligations of the Partnership.

     During  1996,  the  Partnership  anticipates  approximately  $1,299,000  of
capital  improvements (of which $390,000  represents PSI's joint venture share).
The  anticipated  increase  in  capital  improvements  in 1996 is mainly  due to
$222,000  of  budgeted   improvements  at  the  Partnership's   business  parks;
specifically landscaping and tenant improvements to vacated spaces on terminated
leases.  During 1995, the Partnership's  property manager commenced a program to
enhance the visual appearance of the  mini-warehouse  facilities  managed by it.
Such  enhancements  will  include  new  signs,   exterior  color  schemes,   and
improvements  to the rental  offices.  Included in the 1996 capital  improvement
budget are  estimated  costs of $256,000 for such  enhancements.  Total  capital
improvements were $757,000 for the nine months ended September 30, 1996 of which
$527,000 represents the Partnership's share.

     The  Partnership  paid  distributions  to the limited and general  partners
totaling  $3,564,000  ($27.84 per unit) and $436,000,  respectively,  during the
first  nine  months of 1996.  The  quarterly  distribution  amount  per unit was
reduced to $6.96 per unit in the third quarter of 1996. The reduction  reflected
the Partnership's need to replenish cash reserves that have been depleted due to
the Partnership's making capital expenditures to modernize the appearance of the
mini-warehouse  buildings and facility signage. Future distribution rates may be
adjusted to levels  which are  supported by  operating  cash flow after  capital
improvements and any other necessary obligations.




                                       8
<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)      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 12, 1996

                                     PS PARTNERS III, LTD.


                            BY:      Public Storage, Inc.
                                     General Partner

                            BY:        /s/ Ronald L. Havner Jr.
                                     -----------------------------
                                     Ronald L. Havner, Jr.
                                     Senior Vice President and Chief Financial
                                       Officer of Public Storage, Inc.
                                       (principal financial officer)

                            BY:        /s/ John Reyes
                                     -----------------------------
                                     John Reyes
                                     Vice President and Controller
                                       of Public Storage, Inc.
                                       (principal accounting officer)


                                       9