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 June 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
     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 June 30, 1997
          and December 31, 1996                                            2

     Condensed consolidated statements of income for the three
          and six months ended June 30, 1997 and 1996                      3

     Condensed consolidated statements of cash flows for the
          six months ended June 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>

                              PS PARTNERS III, LTD.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


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


      <S>                                                                                    <C>                <C>      
      Cash and cash equivalents                                                               $ 811,000          $ 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                                                             68,035,000         75,323,000
                                                                                         ------------------------------------
                                                                                             81,892,000         90,715,000

         Less accumulated depreciation                                                      (33,363,000)       (35,783,000)
                                                                                         ------------------------------------
                                                                                             48,529,000         54,932,000

      Investment in real estate entity                                                        5,587,000                  -

      Other assets                                                                              145,000            275,000
                                                                                         ------------------------------------

                                                                                           $ 55,196,000       $ 55,859,000
                                                                                         ====================================


                        LIABILITIES AND PARTNERS' EQUITY


      Accounts payable                                                                        $ 545,000          $ 894,000

      Advance payments from renters                                                             504,000            511,000

      Minority interest in general partnerships                                              28,342,000         28,297,000

      Partners' equity:
         Limited partners' equity, $500 per unit, 128,000
            units authorized, issued and outstanding                                         25,463,000         25,812,000
         General partner's equity                                                               342,000            345,000
                                                                                         ------------------------------------

      Total partners' equity                                                                 25,805,000         26,157,000
                                                                                         ------------------------------------

                                                                                           $ 55,196,000       $ 55,859,000
                                                                                         ====================================
</TABLE>
                            See accompanying notes.
                                       2



<PAGE>


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

<TABLE>
<CAPTION>

                                                                     Three Months Ended                  Six Months Ended
                                                                          June 30,                           June 30,
                                                            ---------------------------------------------------------------------
                                                                   1997             1996             1997              1996
                                                            ---------------------------------------------------------------------

         REVENUE:

         <S>                                                    <C>              <C>              <C>               <C>        
         Rental income                                          $ 3,831,000      $ 3,961,000      $ 7,537,000       $ 7,848,000
         Equity in income of real estate entity                     104,000                -          177,000                 -
         Interest income                                              9,000            5,000           15,000            10,000
                                                            ---------------------------------------------------------------------
                                                                  3,944,000        3,966,000        7,729,000         7,858,000
                                                            ---------------------------------------------------------------------

         COSTS AND EXPENSES:

         Cost of operations                                       1,231,000        1,244,000        2,538,000         2,554,000
         Management fees                                            230,000          235,000          452,000           466,000
         Depreciation and amortization                              829,000          877,000        1,643,000         1,749,000
         Administrative                                              57,000           60,000           78,000            79,000
                                                            ---------------------------------------------------------------------
                                                                  2,347,000        2,416,000        4,711,000         4,848,000
                                                            ---------------------------------------------------------------------

         Income before minority interest                          1,597,000        1,550,000        3,018,000         3,010,000

         Minority interest in income                               (711,000)        (823,000)      (1,369,000)       (1,594,000)
                                                            ---------------------------------------------------------------------

         NET INCOME                                               $ 886,000        $ 727,000      $ 1,649,000       $ 1,416,000
                                                            =====================================================================

         Limited partners' share of net income
            ($11.21 per unit in 1997 and $8.63
            per unit in 1996)                                                                     $ 1,435,000       $ 1,105,000
         General partner's share of net income                                                        214,000           311,000
                                                                                              -----------------------------------

                                                                                                  $ 1,649,000       $ 1,416,000
                                                                                              ===================================
</TABLE>
                            See accompanying notes.
                                       3


<PAGE>


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

<TABLE>
<CAPTION>

                                                                                                  Six Months Ended
                                                                                                      June 30,
                                                                                       ---------------------------------------
                                                                                              1997                1996
                                                                                       ---------------------------------------

          CASH FLOWS FROM OPERATING ACTIVITIES:

             <S>                                                                           <C>                 <C>        
             Net income                                                                    $ 1,649,000         $ 1,416,000

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

                 Depreciation and amortization                                               1,643,000           1,749,000
                 Increase in rent and other receivables                                         (1,000)            (39,000)
                 Decrease (increase) in other assets                                           130,000             (33,000)
                 Decrease in accounts payable                                                 (349,000)           (143,000)
                 (Decrease) increase in advance payments from renters                           (7,000)             24,000
                 Equity income in real estate entity                                          (177,000)                  -
                 Minority interest in income                                                 1,369,000           1,594,000
                                                                                       ---------------------------------------

                   Total adjustments                                                         2,608,000           3,152,000
                                                                                       ---------------------------------------

                   Net cash provided by operating activities                                 4,257,000           4,568,000
                                                                                       ---------------------------------------

          CASH FLOWS USED IN INVESTING ACTIVITIES:

             Investment in real estate entity                                                  (11,000)                  -
             Additions to real estate facilities                                              (639,000)           (234,000)
                                                                                       ---------------------------------------

                   Net cash used in investing activities                                      (650,000)           (234,000)
                                                                                       ---------------------------------------

          CASH FLOWS USED IN FINANCING ACTIVITIES:

             Distributions to holder of minority interest                                   (1,324,000)         (1,469,000)
             Distributions to partners                                                      (2,001,000)         (2,999,000)
                                                                                       ---------------------------------------

                   Net cash used in financing activities                                    (3,325,000)         (4,468,000)
                                                                                       ---------------------------------------

          Net increase (decrease) in cash and cash equivalents                                 282,000            (134,000)

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

          Cash and cash equivalents at the end of the period                                 $ 811,000           $ 321,000
                                                                                       =======================================
</TABLE>
                            See accompanying notes.
                                       4

<PAGE>


                              PS PARTNERS III, LTD.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                   (Continued)

<TABLE>
<CAPTION>

                                                                                                Six Months Ended
                                                                                                    June 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                 -

</TABLE>
                            See accompanying notes.
                                       5



<PAGE>


                              PS PARTNERS III, LTD.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 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 June 30,  1997,  the results of  operations  for the
     three and six months  ended  June 30,  1997 and 1996 and cash flows for the
     six months then ended.

3.   The results of operations  for the three and six months ended June 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>

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 six months ended June 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 JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996:

     The  Partnership's  net income for the three months ended June 30, 1997 was
$886,000  compared  to  $727,000  for the  three  months  ended  June 30,  1996,
representing an increase of $159,000,  or 22%. 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.

     Rental  income  for  the   Partnership's   mini-warehouse   operations  was
$3,831,000  compared to $3,716,000  for the three months ended June 30, 1997 and
1996, respectively, representing an increase of $115,000, or 3%. The increase in
rental  income was primarily  attributable  to increased  rental  rates,  offset
partially by decreased average  occupancy  levels.  The monthly average realized
rent per square foot for the mini-warehouse facilities was $.58 compared to $.55
for the three  months ended June 30, 1997 and 1996,  respectively.  The weighted
average occupancy levels at the mini-warehouse  facilities decreased from 92% to
90% for the three  months  ended June 30, 1996 and 1997,  respectively.  Cost of
operations  (including  management fees) increased $92,000, or 7%, to $1,461,000
from $1,369,000 for the three months ended June 30, 1997 and 1996, respectively.
The increase was primarily  attributable to increases in  advertising,  payroll,
repairs  and  maintenance,  and  property  tax  expenses.  Accordingly,  for the
Partnership's mini-warehouse operations, property net operating income increased
by $23,000 from  $2,347,000  to  $2,370,000  for the three months ended June 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 June 30,


                                       8
<PAGE>

1997 compared to the  operation of the exchanged  business park facility for the
three months ended June 30, 1996:

                                                  Three Months Ended June 30,
                                                -------------------------------
                                                     1997             1996
                                                ---------------  --------------
Equity in earnings of real estate entity         $  104,000       $         -
Rental income                                             -           245,000
Cost of operations                                        -           110,000
                                                ---------------  ---------------
Net operating income                                104,000           135,000
Depreciation                                              -           101,000
                                                ---------------  ---------------
                                                 $  104,000       $    34,000
                                                ===============  ===============


     Depreciation   and   amortization   attributable   to   the   Partnership's
mini-warehouse  facilities  increased  $53,000 from $776,000 to $829,000 for the
three  months  ended June 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  $112,000,  or 14%, to $711,000 from
$823,000 for the three months ended June 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
$138,000 for the three  months  ended June 30, 1997  compared to $43,000 for the
same  period  in  1996,   combined  with  a  decrease  in  net  income  (net  of
depreciation)  for the  Partnership's  real estate facilities owned jointly with
PSI.

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996:

     The  Partnership's  net income for the six months  ended June 30,  1997 was
$1,649,000  compared  to  $1,416,000  for the six months  ended  June 30,  1996,
representing an increase of $233,000,  or 16%. 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.

     Rental  income  for  the   Partnership's   mini-warehouse   operations  was
$7,537,000  compared to  $7,342,000  for the six months  ended June 30, 1997 and
1996, respectively, representing an increase of $195,000, 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 $.55 for


                                       9
<PAGE>

the six months ended June 30, 1997 and 1996, respectively.  The weighted average
occupancy levels at the mini-warehouse  facilities decreased from 91% to 89% for
the six months ended June 30, 1996 and 1997,  respectively.  Cost of  operations
(including  management  fees)  increased  $176,000,  or 6%, to  $2,990,000  from
$2,814,000  for the six months ended June 30, 1997 and 1996,  respectively.  The
increase was primarily  attributable  to increases in  advertising,  repairs and
maintenance,   property  tax,  and  payroll  expenses.   Accordingly,   for  the
Partnership's mini-warehouse operations, property net operating income increased
by $19,000 from  $4,528,000 to $4,547,000 for the six months ended June 30, 1996
and 1997, respectively.

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


                                                    Six Months Ended June 30,
                                                  -----------------------------
                                                       1997            1996
                                                  -------------   -------------
 Equity in earnings of real estate entity          $  177,000      $         -
 Rental income                                              -          506,000
 Cost of operations                                         -          206,000
                                                  -------------   -------------
 Net operating income                                 177,000          300,000
 Depreciation                                               -          204,000
                                                  -------------   -------------
                                                   $  177,000        $  96,000
                                                  =============   =============

     Depreciation   and   amortization   attributable   to   the   Partnership's
mini-warehouse  facilities  increased  $98,000 from $1,545,000 to $1,643,000 for
the six months  ended June 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  $1,369,000 in 1997 compared to $1,594,000
in 1996,  representing  a  decrease  of  $225,000,  or 14%.  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  $260,000  for the six
months  ended June 30,  1997  compared  to $85,000  for the same period in 1996,
combined  with  a  decrease  in  net  income  (net  of  depreciation)   for  the
Partnership's real estate facilities owned jointly with PSI.


                                       10
<PAGE>

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
($4,257,000  for the six months ended June 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
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
$639,000 for the six months ended June 30, 1997 of which $482,000 represents the
Partnership's share.

     The  Partnership  paid  distributions  to the limited and general  partners
totaling  $1,783,000  ($13.92 per unit) and $218,000,  respectively,  during the
first six 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:           August 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