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, 1998
                     -------------

                                       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, 1998
     and December 31, 1997                                                 2

Condensed consolidated statements of income for the three
     and six months ended June 30, 1998 and 1997                           3

Condensed consolidated statements of cash flows for the
     six months ended June 30, 1998 and 1997                               4-5

Notes to condensed consolidated financial statements                       6

Management's discussion and analysis of financial condition
     and results of operations                                             7-9

PART II.  OTHER INFORMATION

(Items 1 through 5 are not applicable)

Item 6 - Exhibits and Reports on Form 8-K                                  10


<PAGE>


                              PS PARTNERS III, LTD.
                      CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                       June 30,        December 31,
                                                                         1998              1997
                                                                     ------------------------------
                                                                     (Unaudited)

                                     ASSETS


      <S>                                                            <C>                <C>       
      Cash and cash equivalents                                       $2,748,000         $1,455,000

      Rent and other receivables                                         138,000            244,000

      Real estate facilities, at cost:
         Land                                                         13,856,000         13,856,000
         Buildings and equipment                                      69,377,000         68,931,000
                                                                     ------------------------------
                                                                      83,233,000         82,787,000

         Less accumulated depreciation                               (36,789,000)       (35,058,000)
                                                                     ------------------------------
                                                                      46,444,000         47,729,000

      Investment in real estate entity                                 5,629,000          5,608,000

      Other assets                                                       146,000            144,000
                                                                     ------------------------------

                                                                     $55,105,000        $55,180,000
                                                                     ==============================


                        LIABILITIES AND PARTNERS' EQUITY


      Accounts payable                                                  $827,000           $932,000

      Advance payments from renters                                      554,000            476,000

      Minority interest in general partnerships                       28,190,000         28,192,000

      Partners' equity:
         Limited partners' equity, $500 per unit, 128,000
            units authorized, issued and outstanding                  25,195,000         25,240,000
         General partner's equity                                        339,000            340,000
                                                                     ------------------------------

      Total partners' equity                                          25,534,000         25,580,000
                                                                     ------------------------------

                                                                     $55,105,000        $55,180,000
                                                                     ==============================
</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,
                                                          -------------------------------------------------------------------
                                                                1998             1997             1998              1997
                                                          -------------------------------------------------------------------

         REVENUE:

         <S>                                                 <C>              <C>              <C>               <C>       
         Rental income                                       $3,978,000       $3,831,000       $7,824,000        $7,537,000
         Equity in income of real estate entity                 122,000          104,000          225,000           177,000
         Interest income                                         30,000            9,000           50,000            15,000
                                                          -------------------------------------------------------------------
                                                              4,130,000        3,944,000        8,099,000         7,729,000
                                                          -------------------------------------------------------------------

         COSTS AND EXPENSES:

         Cost of operations                                   1,305,000        1,231,000        2,578,000         2,538,000
         Management fees                                        241,000          230,000          472,000           452,000
         Depreciation and amortization                          868,000          829,000        1,731,000         1,643,000
         Administrative                                          63,000           57,000           85,000            78,000
                                                          -------------------------------------------------------------------
                                                              2,477,000        2,347,000        4,866,000         4,711,000
                                                          -------------------------------------------------------------------

         Income before minority interest                      1,653,000        1,597,000        3,233,000         3,018,000

         Minority interest in income                           (611,000)        (711,000)      (1,279,000)       (1,369,000)
                                                          -------------------------------------------------------------------

         NET INCOME                                          $1,042,000         $886,000       $1,954,000        $1,649,000
                                                          ===================================================================

         Limited partners' share of net income
            ($13.57 per unit in 1998 and
            $11.21 per unit in 1997)                                                           $1,737,000        $1,435,000
         General partner's share of net income                                                    217,000           214,000
                                                                                          -----------------------------------
                                                                                               $1,954,000        $1,649,000
                                                                                          ===================================
</TABLE>
                            See accompanying notes.
                                       3


<PAGE>


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


<TABLE>
<CAPTION>
                                                                                       Six Months Ended
                                                                                          June 30,
                                                                               ---------------------------------
                                                                                   1998                1997
                                                                               ---------------------------------

          CASH FLOWS FROM OPERATING ACTIVITIES:

             <S>                                                                 <C>                 <C>       
             Net income                                                          $1,954,000          $1,649,000

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

                 Depreciation and amortization                                    1,731,000           1,643,000
                 Decrease (increase) in rent and other receivables                  106,000              (1,000)
                 (Increase) decrease in other assets                                 (2,000)            130,000
                 Decrease in accounts payable                                      (105,000)           (349,000)
                 Increase (decrease) in advance payments from renters                78,000              (7,000)
                 Equity income in real estate entity                               (225,000)           (177,000)
                 Minority interest in income                                      1,279,000           1,369,000
                                                                               ---------------------------------

                   Total adjustments                                              2,862,000           2,608,000
                                                                               ---------------------------------

                   Net cash provided by operating activities                      4,816,000           4,257,000
                                                                               ---------------------------------

          CASH FLOWS USED IN INVESTING ACTIVITIES:

             Distributions from real estate entity                                  204,000                   -
             Investment in real estate entity                                             -             (11,000)
             Additions to real estate facilities                                   (446,000)           (639,000)
                                                                               ---------------------------------

                   Net cash used in investing activities                           (242,000)           (650,000)
                                                                               ---------------------------------

          CASH FLOWS USED IN FINANCING ACTIVITIES:

             Distributions to holder of minority interest                        (1,281,000)         (1,324,000)
             Distributions to partners                                           (2,000,000)         (2,001,000)
                                                                               ---------------------------------

                   Net cash used in financing activities                         (3,281,000)         (3,325,000)
                                                                               ---------------------------------

          Net increase in cash and cash equivalents                               1,293,000             282,000

          Cash and cash equivalents at the beginning of the period                1,455,000             529,000
                                                                               ---------------------------------

          Cash and cash equivalents at the end of the period                     $2,748,000            $811,000
                                                                               =================================
</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,
                                                                                    ------------------------------------
                                                                                          1998              1997
                                                                                    ------------------------------------


       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, net        -             5,399,000
       
</TABLE>
                            See accompanying notes.
                                       5


<PAGE>


                              PS PARTNERS III, LTD.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1998
                                   (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, 1997.

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,  1998,  the results of  operations  for the
     three and six months  ended  June 30,  1998 and 1997 and cash flows for the
     six months then ended.

3.   The results of operations  for the three and six months ended June 30, 1998
     are not  necessarily  indicative of the results to be expected for the full
     year.


                                       6


<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, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997:

     The  Partnership's  net income for the three months ended June 30, 1998 was
$1,042,000  compared  to  $886,000  for the three  months  ended June 30,  1997,
representing an increase of $156,000,  or 18%. The increase was primarily due to
decreased  minority  interest in income for those  properties  held jointly with
PSI,  an  increase  in  property  operations  at the  Partnership's  real estate
facilities, and an increase in interest income.

     Rental  income  for  the   Partnership's   mini-warehouse   operations  was
$3,978,000  compared to $3,831,000  for the three months ended June 30, 1998 and
1997, respectively, representing an increase of $147,000, 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 $.61
compared  to  $.58  for  the  three   months  ended  June  30,  1998  and  1997,
respectively.  The  weighted  average  occupancy  levels  at the  mini-warehouse
facilities  remained  stable at 90% for the three months ended June 30, 1997 and
1998. Cost of operations  (including  management fees) increased $85,000, or 6%,
to $1,546,000 from $1,461,000 for the three months ended June 30, 1998 and 1997,
respectively.   The  increase  was  primarily   attributable   to  increases  in
advertising  and  promotion  (due  primarily  to  the  PSI  national   telephone
reservations center),  property tax, and office expenses.  Accordingly,  for the
Partnership's mini-warehouse operations, property net operating income increased
by $62,000, or 3%, from $2,370,000 to $2,432,000 for the three months ended June
30, 1997 and 1998, respectively.

     Interest income increased $21,000,  or 233%, from $9,000 to $30,000 for the
three  months  ended June 30, 1997 and 1998,  respectively.  This  increase  was
primarily attributable to increased average invested cash balances.

     Depreciation and amortization  increased  $39,000,  or 5%, from $829,000 to
$868,000 for the three months ended June 30, 1997 and 1998,  respectively.  This
increase was primarily  attributable to the depreciation of capital expenditures
made during 1997 and 1998.

     Minority  interest in income decreased  $100,000,  or 14%, to $611,000 from
$711,000 for the three months ended June 30, 1998 and 1997,  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
$319,000 for the three  months ended June 30, 1998  compared to $138,000 for the
same  period in 1997,  partially  offset by an  increase  in  operations  at the
Partnership's real estate facilities owned jointly with PSI.


                                       7


<PAGE>

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997:

     The  Partnership's  net income for the six months  ended June 30,  1998 was
$1,954,000  compared  to  $1,649,000  for the six months  ended  June 30,  1997,
representing an increase of $305,000,  or 19%. The increase was primarily due to
an increase in property  operations at the Partnership's real estate facilities,
decreased  minority  interest in income for those  properties  held jointly with
PSI, and an increase in interest income.

     Rental  income  for  the   Partnership's   mini-warehouse   operations  was
$7,824,000  compared to  $7,537,000  for the six months  ended June 30, 1998 and
1997, respectively, representing an increase of $287,000, 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 $.60
compared to $.58 for the six months ended June 30, 1998 and 1997,  respectively.
The weighted average occupancy levels at the mini-warehouse  facilities remained
stable  at 89% for the  six  months  ended  June  30,  1997  and  1998.  Cost of
operations  (including  management fees) increased $60,000, or 2%, to $3,050,000
from  $2,990,000 for the six months ended June 30, 1998 and 1997,  respectively.
The  increase  was  primarily  attributable  to  increases  in  advertising  and
promotion (due primarily to the PSI national telephone  reservations  center)and
property  tax  expenses,  partially  offset by a decrease  in  payroll  expense.
Accordingly,  for the  Partnership's  mini-warehouse  operations,  property  net
operating income increased by $227,000, or 5%, from $4,547,000 to $4,774,000 for
the six months ended June 30, 1997 and 1998, respectively.

     Interest income increased $35,000, or 233%, from $15,000 to $50,000 for the
six  months  ended  June 30,  1997 and 1998,  respectively.  This  increase  was
primarily attributable to increased average invested cash balances.

     Depreciation and amortization  increased $88,000, or 5%, from $1,643,000 to
$1,731,000 for the six months ended June 30, 1997 and 1998,  respectively.  This
increase was primarily  attributable to the depreciation of capital expenditures
made during 1997 and 1998.

     Minority  interest in income was  $1,279,000 in 1998 compared to $1,369,000
in 1997,  representing a decrease of $90,000, or 7%. 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  $495,000  for the six
months  ended June 30, 1998  compared  to $260,000  for the same period in 1997,
partially offset by an increase in operations at the  Partnership's  real estate
facilities owned jointly with PSI.


                                       8

<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
($4,816,000  for the six months ended June 30, 1998) has been sufficient to meet
all current obligations of the Partnership.

     During  1998,  the  Partnership  anticipates  approximately  $1,227,000  of
capital  improvements (of which $379,000  represents PSI's joint venture share).
Total capital  improvements were $446,000 for the six months ended June 30, 1998
of which $295,000 represents the Partnership's share.

     The  Partnership  paid  distributions  to the limited and general  partners
totaling  $1,782,000  ($13.92 per unit) and $218,000,  respectively,  during the
first six months of 1998.  Future  distribution  rates may be adjusted to levels
which are supported by operating  cash flow after capital  improvements  and any
other necessary obligations.


                                       9


<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, 1998

                                    PS PARTNERS III, LTD.

                           BY:      Public Storage, Inc.
                                    General Partner

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


                                       10