SECURITIES & EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


    (MARK ONE)

    [X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 2000

                                       OR

    [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934


       For the transition period from _____________ to _______________


                         Commission file number: 0-13406


                          The Chalone Wine Group, Ltd.

             (Exact Name of Registrant as Specified in Its Charter)


             California                                  94-1696731
   (State or Other Jurisdiction of
   Incorporation or Organization)           (I.R.S. Employer Identification No.)


           621 Airpark Road
           Napa, California                                94558
 (Address of Principal Executive Offices)                (Zip Code)


        Registrant's Telephone Number, Including Area Code: 707-254-4200


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
                                     ---        ---


The number of shares  outstanding  of  Registrant's  Common Stock on January 30,
2001 was 10,247,241.


<PAGE>


                          The Chalone Wine Group, Ltd.

                         PART I. - FINANCIAL INFORMATION


                                                                            PAGE

ITEM 1. FINANCIAL STATEMENTS

     Unaudited Consolidated Balance Sheets as of  December 31, 2000,
     and March 31, 2000.                                                      3

     Unaudited  Consolidated  Statements of Income for the  three-month
     and nine-month periods ended December 31, 2000 and 1999.                 4

     Unaudited Consolidated Statements of Cash Flows for the
     three-month and nine-month periods ended December 31, 2000 and 1999.     5

     Notes to Consolidated Financial Statements.                              6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS                                             8

ITEM 3. DISCLOSURES ABOUT MARKET RISK                                        12

                          PART II. - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                     16


<PAGE>

<TABLE>
<CAPTION>


                          The Chalone Wine Group, Ltd.

                           CONSOLIDATED BALANCE SHEETS
                  (UNAUDITED, IN THOUSANDS, EXCEPT SHARE DATA)


                               ASSETS

                                                                        December 31,             March 31,
                                                                            2000                   2000
                                                                     ------------------          ---------
<S>                                                                           <C>                <C>

Current assets
     Accounts receivable, less allowance for doubtful
         accounts of $376 and $129, respectively                             $  12,339           $   9,836
     Notes receivable - affiliate                                                  145                 119
     Income tax receivable                                                         383               1,178
     Inventory                                                                  64,202              51,826
     Prepaid expenses                                                              285                 579
     Deferred income taxes                                                         894                 894
                                                                             ---------           ---------
         Total current assets                                                   78,248              64,432
Investment in Chateau Duhart-Milon                                               9,127               9,146
Property, plant and equipment - net                                             63,261              64,134
Goodwill and trademarks - net of accumulated
    amortization of $2,063 and $1,743, respectively                              9,799               7,220
Other assets                                                                       746                 733
                                                                             ---------           ---------
         Total assets                                                        $ 161,181           $ 145,665
                                                                             =========           =========

               LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
     Accounts payable and accrued liabilities                                $  14,433           $   5,650
     Revolving bank loan                                                        12,960              27,017
     Current maturities of long-term borrowings                                  2,050               1,784
                                                                             ---------           ---------
         Total current liabilities                                              29,443              34,451
Long-term borrowings, less current maturities                                   50,503              31,041
Deferred income taxes                                                            1,743               1,743
                                                                             ---------           ---------
         Total liabilities                                                      81,689              67,235
                                                                             ---------           ---------
Minority interest                                                                4,373               4,758
Shareholders' equity
     Common stock - authorized 15,000,000 shares no par value;
         issued and outstanding: 10,247,241 and 10,224,521 shares,              61,423              61,377
         respectively
     Retained earnings                                                          17,428              15,851
     Cumulative foreign currency translation adjustment                         (3,732)             (3,556)
                                                                             ---------           ---------
         Total shareholders' equity                                             75,119              73,672
                                                                             ---------           ---------
         Total liabilities and shareholders' equity                          $ 161,181           $ 145,665
                                                                             =========           =========

 The accompanying notes are an integral part of the consolidated financial statements


</TABLE>


                                       3

<PAGE>

<TABLE>
<CAPTION>


                          The Chalone Wine Group, LTD.

                        CONSOLIDATED STATEMENTS OF INCOME
                (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)




                                                            Three Months Ended                          Nine Months Ended
                                                               December 31,                               December 31,
                                                        ---------------------------                ---------------------------
                                                          2000               1999                    2000               1999
                                                        --------           --------                --------           --------
<S>                                                     <C>                <C>                     <C>                <C>

Gross revenues                                          $ 18,828           $ 16,361                $ 47,557           $ 40,366
    Excise taxes                                            (490)              (424)                 (1,252)            (1,013)
                                                        --------           --------                --------           --------
Net revenues                                              18,338             15,937                  46,305             39,353
Cost of wines sold                                       (11,885)            (8,468)                (30,125)           (21,034)
                                                        --------           --------                --------           --------
    Gross profit                                           6,453              7,469                  16,180             18,319
Revenues from other operations, net                          122                  9                     160                 62
Selling, general and administrative expenses              (4,285)            (3,826)                (12,047)           (10,271)
                                                        --------           --------                --------           --------
    Operating income                                       2,290              3,652                   4,293              8,110
Interest expense                                            (940)              (674)                 (2,887)            (1,766)
Equity in net income of Chateau Duhart-Milon                 181                168                     714                698
Minority interests                                          (213)              (338)                   (315)              (967)
Other Income                                                  20                 20                     868                 41
                                                        --------           --------                --------           --------
    Income before income taxes                             1,338              2,828                   2,673              6,116
Income taxes                                                (549)            (1,159)                 (1,096)            (2,507)
                                                        --------           --------                --------           --------
    Net income                                          $    789           $  1,669                $  1,577           $  3,609
                                                        ========           ========                ========           ========

Net income per common share
    Basic                                               $   0.08           $   0.18                  $ 0.15             $ 0.39
    Diluted                                             $   0.08           $   0.18                  $ 0.15             $ 0.38

Weighted average number of shares outstanding:
    Basic                                                 10,244              9,366                  10,234              9,332
    Diluted                                               10,244              9,511                  10,234              9,451


 The accompanying notes are an integral part of the consolidated financial statements


</TABLE>


                                        4


<PAGE>

<TABLE>
<CAPTION>

                          The Chalone Wine Group, LTD.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (UNAUDITED, IN THOUSANDS)


                                                                       Three months ended           Nine months ended
                                                                          December 31,                December 31,
                                                                     -----------------------       -------------------
                                                                       2000           1999           2000        1999
                                                                     --------        -------       --------    -------
<S>                                                                   <C>             <C>          <C>          <C>

Cash flows from operating activities:
   Net income                                                        $    789        $ 1,669       $  1,577    $ 3,609
   Adjustments to reconcile net income to net cash provided
      by operating activities:
   Depreciation and amortization                                        3,414          2,621          5,318      3,960
   Equity in net income of Chateau Duhart-Milon                          (181)           569           (714)        39
   Increase (Decrease) in minority interest                               213            339            315        968
   Loss(Gain) on sale of assets                                            34            (11)          (803)       (12)
   Changes in:
      Deferred Income Taxes                                                 -           (398)             -       (398)
      Accounts and other receivables                                   (1,196)          (401)        (1,734)    (2,330)
      Inventory                                                       (15,137)        (7,712)       (11,776)    (9,099)
      Prepaid expenses and other assets                                  (230)        (1,315)           281     (1,425)
      Accounts payable and accrued liabilities                          8,710          2,289          8,783      5,076
                                                                     --------        -------       --------    -------
   Net cash provided (used) by operating activities                    (3,584)        (2,350)         1,247        388
                                                                     --------        -------       --------    -------
Cash flows from investing activities:
   Capital expenditures                                                (3,334)        (2,216)       (10,821)    (7,850)
   Property and business acquisitions                                       -              -         (3,518)    (6,127)
   Proceeds from disposal of property and equipment                        99             39          7,518        104
   Distributions from Duhart-Milon                                         (7)             -            557        738
                                                                     --------        -------       --------    -------
   Net cash used in investing activities                               (3,242)        (2,177)        (6,264)   (13,135)
                                                                     --------        -------       --------    -------
Cash flows from financing activities:
   Borrowings (Repayments) on revolving bank loan - net                 7,050          5,204        (14,057)    14,426
   Distributions to minority interests                                   (300)          (400)          (700)      (700)
   Proceeds from issuance of notes                                          -              -         30,000          -
   Repayment of long-term debt                                            (11)           (10)       (10,272)    (2,370)
   Proceeds from issuance of common stock                                  47            (3)             46         (5)
                                                                     --------        -------       --------    -------
   Net cash provided by financing activities                            6,786          4,791          5,017     11,351
                                                                     --------        -------       --------    -------
Net increase (decrease) in cash and equivalents                           (40)           264              -     (1,396)
Cash and equivalents at beginning of period                                40             10              -      1,670
                                                                     --------        -------       --------    -------
Cash and equivalents at end of period                                $      -        $   274       $      -    $   274
                                                                     ========        =======       ========    =======

Other cash flow information:
   Interest paid                                                     $    953        $   576       $  3,018    $ 1,689
   Income taxes paid                                                       83            624            222      2,241


 The accompanying notes are an integral part of the consolidated financial statements


</TABLE>


                                       5


<PAGE>


                          The Chalone Wine Group, Ltd.



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS

      The unaudited consolidated financial statements of the Chalone Wine Group,
Ltd.  ("the  Company") are prepared in  conformity  with  accounting  principles
generally  accepted  in the  United  States of  America  for  interim  financial
information,  and the rules  and  regulations  of the  Securities  and  Exchange
Commission.  In the opinion of management,  all adjustments necessary for a fair
presentation of the financial position and results of operations for the periods
presented have been included.  All such  adjustments  are of a normal  recurring
nature.  These unaudited  consolidated  financial  statements  should be read in
conjunction with the audited  consolidated  financial statements included in the
Company's Form 10-K for the year ended March 31, 2000.


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

     The  preparation of the financial  statements in conformity with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported  financial
statement  amounts  and  related  disclosures  at  the  date  of  the  financial
statements. Actual results could differ from these estimates.


RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities"  that
establishes  accounting and reporting  standards for derivative  instruments and
hedging  activities.  It requires that  derivatives be recognized in the balance
sheet at fair value and specifies the accounting  for changes in fair value.  In
June 1999,  the FASB issued SFAS No. 137, that defers the effective date of SFAS
No. 133 until fiscal years  beginning  after June 15, 2000. The Company plans to
adopt  SFAS No.  133 in fiscal  2002 and does not  expect it to have a  material
effect on the consolidated financial statements.

NOTE 3 - COMPREHENSIVE INCOME

     Comprehensive  income includes unrealized foreign currency gains and losses
related to the Company's investment in Chateau Duhart-Milon.  The following is a
reconciliation of net income and comprehensive income (IN THOUSANDS):

<TABLE>
<CAPTION>

                                                 Three months ended      Nine months ended
                                                    December 31,          December 31,
                                                 ------------------     -------------------
                                                 2000          1999     2000           1999
                                                 ----          ----     ----           ----
<S>                                            <C>           <C>       <C>           <C>

 Net income                                    $  789        $1,669    $1,577        $3,609
 Foreign currency translation gain (loss)         627          (557)     (176)         (719)
                                               ------        ------    ------        ------
 Comprehensive income                          $1,416        $1,112    $1,401        $2,890
                                               ======        ======    ======        ======

</TABLE>


NOTE 4 - EARNINGS PER SHARE ("EPS")

     Basic EPS represents  net income divided by the weighted  average number of
common shares  outstanding  for the period.  Diluted EPS  represents  net income
divided by the weighted average of common shares  outstanding  while also giving
effect  to the  potential  dilution  that  could  occur if  securities  or other
contracts  to issue  common  stock  (e.g.  stock  options)  were  exercised  and
converted into stock. This effect is calculated using the treasury stock method.


                                       6


<PAGE>


                          The Chalone Wine Group, Ltd.


NOTE 5 - ACQUISITION OF  JADE MOUNTAIN BRAND NAME RIGHTS AND INVENTORY

     On April 4, 2000,  the Company  purchased  exclusive  brand name rights and
inventory of Jade Mountain Winery, a vineyard located in Napa county, California
producing Rhone varietal wines. The acquisition price of $3.5 million, which was
financed with the Company's available  revolving credit facility,  was allocated
based on  estimated  fair  values to an  intangible  asset in the amount of $2.9
million representing the brand name rights with the remaining $600,000 allocated
primarily to inventory.  The brand name rights will be amortized  over 20 years.
In addition, the Company has entered into a long-term contract with the owner of
Jade Mountain to purchase Syrah,  Viognier,  Grenache and Merlot grapes produced
from a related vineyard.


NOTE 6 - BORROWING ARRANGEMENTS

     On September 15, 2000 the Company refinanced certain borrowings through the
issuance of $30 million of Senior  Unsecured Notes (the "Notes") . Proceeds from
the Notes  were  used to repay a portion  of bank  borrowings  under a  previous
Credit Agreement in the amounts of $20 million of revolving debt and $10 million
of a $30 million term loan.  Interest on the Notes is payable quarterly at rates
ranging  from 8.93% to 9.05%,  as amended on  February  9, 2001,  and  principal
repayments  are  scheduled  beginning  September  15, 2004  through  maturity on
September 15, 2010. In connection  with this  refinancing,  available  revolving
debt borrowings  under the Credit Agreement were reduced from $40 million to $25
million,  of which the Company had  borrowed  $13.0  million as of December  31,
2000.

     The Notes were issued pursuant to a Note Purchase Agreement which contains
restrictive  covenants  including  requirements  to maintain  certain  financial
ratios and restrictions on additional  indebtedness,  asset sales,  investments,
and  payment  of  dividends.  At  December  31,  2000,  the  Company  was not in
compliance with one of these covenants and with a covenant requirement under the
Credit Agreement,  however, the Note Purchase Agreement and the Credit Agreement
were amended on February 9, 2001 and February 12, 2001,  respectively,  to waive
such  non-compliance  retroactive  to the quarter ended December 31, 2000 and to
reset interest rates on the Notes.

NOTE 7 - OTHER INCOME

     On July 14, 2000,  the Company sold the 10,000 square foot Hewitt House and
four surrounding landscaped acres located in Napa Valley's Rutherford Bench area
for  $7,740,000  resulting in a gain of $837,000  included in other income.  The
property was  originally  acquired in the Company's  fiscal year 2000 as part of
its acquisition of the Hewitt Ranch.


NOTE 8 - SUBSEQUENT EVENT

     On February 7, 2001,  the Company  purchased the  remaining  49.5% of Canoe
Ridge Vineyard,  LLC making Canoe Ridge Vineyard,  LLC a wholly owned subsidiary
of the  Company.  The  cost of the  acquisition  was  approximately  $6  million
including $2 million in debt assumption and was financed with the Company's bank
line of credit.  The Company  will record this  acquisition  using the  purchase
method of accounting.

     The Company plans to continue  producing  and marketing the existing  Canoe
Ridge  brand which is  primarily  Merlot,  Cabernet  Sauvignon,  and  Chardonnay
varietals.


                                       7


<PAGE>


                          The Chalone Wine Group, Ltd.


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

     From time to time, information provided by the Company,  statements made by
its employees,  or  information  included in its filings with the Securities and
Exchange Commission  (including this Form 10-Q) may contain statements which are
not historical facts, so called "forward looking  statements" that involve risks
and  uncertainties.  Forward  looking  statements  are made pursuant to the safe
harbor provisions of the Private Securities  Litigation Reform Act of 1995. When
used in  this  Form  10-Q,  the  terms  "anticipates,"  "expects,"  "estimates,"
"intends,"  "believes," and other similar terms as they relate to the Company or
its  management  are intended to identify such forward  looking  statements.  In
particular,  statements  made  in  this  Item  2,  relating  to  projections  or
predictions  about the  Company's  future  investments  in  vineyards  and other
capital  projects are forward looking  statements.  The Company's  actual future
results  may differ  significantly  from  those  stated in any  forward  looking
statements. Factors that may cause such differences include, but are not limited
to (i) reduced  consumer  spending or a change in  consumer  preferences,  which
could reduce  demand for the Company's  wines;  (ii)  competition  from numerous
domestic and foreign wine producers which could affect the Company's  ability to
sustain volume and revenue  growth;  (iii) interest rates and other business and
economic  conditions  which could increase  significantly  the cost and risks of
borrowings  associated  with present and projected  capital  projects;  (iv) the
price and  availability  in the  marketplace  of grapes  meeting  the  Company's
quality   standards  and  other   requirements;   (v)  the  effect  of  weather,
agricultural  pests and disease and other natural  forces on growing  conditions
and, in turn, the quality and quantity of grapes  produced by the Company;  (vi)
regulatory  changes which might restrict or hinder the sale and/or  distribution
of alcoholic  beverages and (vii) the risks  associated with the assimilation of
acquisitions.  Each of these factors, and other risks pertaining to the Company,
the premium wine industry and general business and economic conditions, are more
fully  discussed  herein  and  from  time to  time in  other  filings  with  the
Securities  and Exchange  Commission,  including the Company's  annual report on
Form 10-K for the year ended March 31, 2000.


DESCRIPTION OF THE BUSINESS


     The Company produces,  markets and sells super premium,  ultra premium, and
luxury-priced white and red varietal table wines,  primarily  Chardonnay,  Pinot
Noir,  Cabernet Sauvignon,  Merlot,  Syrah and Sauvignon Blanc. The Company owns
and operates  wineries in various  counties of California and Washington  State.
The Company's wines are made partially from grapes grown at the Carmenet Winery,
Edna Valley Vineyard, Chalone Vineyard,  Company-owned vineyards adjacent to the
Acacia Winery in California and the Canoe Ridge Vineyard in Washington State, as
well as from  purchased  grapes.  The wines are primarily  sold under the labels
"Chalone Vineyard(R)," "Edna Valley Vineyard(R),"  "Carmenet(R),"  "Acacia(TM),"
"Canoe  Ridge  Vineyard(R),"  "Jade  Mountain(R),"  "Sagelands  Winery(R),"  and
"Echelon(TM)".


     In France,  the Company owns a minority interest in fourth-growth  Bordeaux
estate Chateau  Duhart-Milon  ("Duhart-Milon")  in partnership with Les Domaines
Barons de Rothschild (Lafite) ("DBR"). The vineyards of Duhart-Milon are located
adjacent  to  the  world-renowned  Chateau  Lafite-Rothschild  in  the  town  of
Pauillac.

     The Chalone Wine Group,  Ltd. was incorporated  under the laws of the State
of California on June 27, 1969. Unless otherwise  indicated,  the term "Company"
as  used  in  this  report  refers  to The  Chalone  Wine  Group,  Ltd.  and its
consolidated subsidiaries.  The Company became a publicly held reporting company
as the result of an initial public offering of common stock in 1984.


                                       8


<PAGE>

                          The Chalone Wine Group, Ltd.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
         OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


RESULTS OF  OPERATIONS - THIRD  QUARTER OF FISCAL 2001 COMPARED TO THIRD QUARTER
OF FISCAL 2000

<TABLE>
<CAPTION>

                                            Three months ended        Percent                Nine months ended          Percent
                                              December 31,            Change                  December 31,              Change
                                        ----------------------------------------         --------------------------   -----------
                                            2000          1999        00 vs 99              2000          1999         00 vs 99
                                        -------------  ------------  -----------         ------------  ------------   -----------
<S>                                          <C>           <C>         <C>                   <C>           <C>           <C>
 Net revenues                                100.0 %       100.0 %       15.1 %              100.0 %       100.0 %        17.7 %
 Cost of sales                               (64.8)%       (53.1)%       40.4 %              (65.1)%       (53.4)%        43.2 %
                                        -------------  ------------                      ------------  ------------
    Gross profit                              35.2 %        46.9 %      (13.6)%               34.9 %        46.6 %       (11.7)%
 Revenues from other operations, net           0.7 %         0.2 %        n/a                  0.3 %         0.3 %         n/a
 Selling, general and admin. expenses        (23.4)%       (24.0)%       12.0 %              (26.0)%       (26.1)%        17.3 %
                                        -------------  ------------                      ------------  ------------
    Operating income                          12.5 %        23.1 %      (37.6)%                9.2 %        20.8 %       (47.3)%
 Interest Expense                             (5.1)%        (4.2)%       39.3 %               (6.2)%        (4.5)%        63.4 %
 Equity in net income of Chateau
    Duhart-Milon                               1.0 %         1.1 %        7.7 %                1.5 %         1.8 %         2.3 %
 Other Income                                  0.1 %         0.0 %        n/a                  1.9 %         0.0 %         n/a
 Minority interests                           (1.2)%        (2.1)%      (36.4)%               (0.7)%        (2.5)%       (67.2)%
                                        -------------  ------------                      ------------  ------------
    Income before income taxes                 7.3 %        17.9 %      (52.7)%                5.7 %        15.6 %       (56.3)%
 Income taxes                                 (3.0)%        (7.3)%      (52.6)%               (2.4)%        (6.4)%       (56.3)%
                                        -------------  ------------                      ------------  ------------
     Net Income                                4.3 %        10.6 %      (52.7)%                3.3 %         9.2 %       (56.3)%
                                        =============  ============                      ============  ============
</TABLE>


NET REVENUES

     Net revenues for the three-month and nine-month  periods ended December 31,
2000  increased  approximately  15% and 18%,  respectively,  over the comparable
periods in the prior year.  These increases were due to increases in the average
revenue-per-case  due to selected price  increases,  changes in product mix, and
increased sales volume.

GROSS PROFIT

     Gross  profit  for the three  and nine  months  ended  December  31,  2000,
decreased by approximately 14% and 12% respectively, over the comparable periods
in the  prior  year.  For the  quarter  ended  December  31,  the  gross  margin
percentage decreased from 46.9% in 1999 to 35.2% in 2000, while the gross margin
decreased from 46.6% to 34.9%, respectively,  for the nine months ended December
31, 1999 and 2000. These gross margin decreases were primarily the direct result
of higher grape and bulk wine costs associated with 1998 and 1999 vintage wines.
The per acre grape  yields  for the 1998 and 1999  harvests  were  below  normal
levels  resulting  in higher  per unit wine  costs and  reduced  volumes.  These
reduced  volumes  necessitated  buying  more  grapes at higher  costs from other
growers and the purchase of bulk wine.  Purchases of bulk wine are significantly
more expensive than wine produced in the Company's facilities.  The 2000 harvest
was back to normal levels, which will cause future per unit wine costs to return
to normal levels and provide the opportunity for margins to improve.

REVENUES FROM OTHER OPERATIONS

     Revenue from other  operations  usually  consists of  processing  and other
revenue from  third-party  wineries and net profit from sales of bulk wine.  The
Company cannot predict the effect on future operating results, as this source of
revenue is highly unpredictable and largely contingent on other wineries' demand
for extra production  capacity,  which can and does vary significantly from year
to year.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling,  general and administrative expenses for the three months and nine
months ended  December 31, 2000,  increased  approximately  $458,000 or 12%, and
$1.8  million or 17%,  respectively,  over the  comparable  periods in the prior
year. These changes are primarily a result of (i) increased selling efforts (ii)
launching  of the new  Sagelands  brand  name and (iii)  other  new  promotional
activities.

                                       9

<PAGE>


                          The Chalone Wine Group, Ltd.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

OPERATING INCOME

     Operating  income for the three months and nine months  ended  December 31,
2000,  decreased  $1.3  million  or 37% and  $3.8  million  or  47%,  due to the
decreases in gross  profits and the related  increases  in selling,  general and
administrative expenses as discussed above.

INTEREST EXPENSE

     Interest expense  increased  $265,000 and $1.1 million for the three months
and nine  months  ended  December  31,  2000,  primarily  due to higher  average
outstanding   borrowings  which  are  a  result  of  (i)  the  Sagelands  Winery
acquisition  which  occurred  during the quarter  ended June 30, 1999;  (ii) the
acquisition of the Hewitt Ranch and Suscol Ranch properties that occurred during
the fourth quarter of the fiscal 2000 year;  (iii) the Jade Mountain  brand-name
acquisition   that  occurred  in  April,   2000  and  (iv)  continuing   capital
expenditures related to winery-expansion.

EQUITY IN NET INCOME OF DUHART-MILON

     The Company's 23.5% equity  interest in the net income of Duhart-Milon  for
the three  months and nine months  ended  December  31,  2000,  are $181,000 and
$714,000  respectively.  These results are primarily driven by sales of the 1997
vintage of  Duhart-Milon,  which are  consistent  with sales of the 1996 vintage
reflected in the prior-year results.

     The Company monitors its investment in Duhart-Milon  primarily  through its
on-going  communication  with DBR.  Such  communication  is  facilitated  by the
presence  of the  Company's  chairman  on DBR's  Board of  Directors,  and DBR's
representation  on the Company's Board of Directors.  Additionally,  various key
employees  of the Company make  periodic  visits to  Duhart-Milon's  offices and
productions facilities.

     Since the investment in Duhart-Milon is a long-term investment  denominated
in a  foreign  currency,  the  Company  records  the gain or loss  for  currency
translation in other comprehensive income or loss, which is part of shareholders
equity.

MINORITY INTEREST

     The Financial  Statements of Edna Valley  Vineyard  ("EVV") and Canoe Ridge
Vineyard,  LLC ("CRV") are consolidated with the Company's financial statements.
The interest in the equity and net income of EVV and CRV attributable to parties
other than the Company is accounted for as a "minority  interest".  The minority
interest  in the net income of EVV and CRV for the three  months and nine months
ended December 31, 2000 and 1999 consisted of the following (IN THOUSANDS):

<TABLE>
<CAPTION>

                                                                            Three months ended           Nine months ended
                                                                               December 31,                 December 31,
                                                             Minority   --------------------------- ---------------------------
Venture                         Minority Owner                Percent        2000           1999          2000           1999
------------                    ------------------           --------   ------------  ------------- ------------  -------------
<S>                             <C>                             <C>          <C>             <C>           <C>           <C>

Edna Valley Vineyard            Paragon Vineyard Co., Inc.      50.00%       $   83          $ 260         $116          $ 722
Canoe Ridge Vineyard, LLC       Various                         49.50%          130             78          199            245
                                                                        ------------  ------------- ------------  -------------
                                                                             $  213          $ 338         $315          $ 967
                                                                        ============  ============= ============  =============

</TABLE>


     The  decrease in minority  interest was $125,000 or 37% and $652,000 or 67%
for each of the  periods  ended  December  31,  2000 when  compared  to the same
periods last year. These decreases are attributable to increased grape and other
production costs.


                                       10


<PAGE>


                          The Chalone Wine Group, Ltd.


NET  INCOME

     Net income for the three  months and nine months  ended  December 31, 2000,
was $789,000 and $1.6 million respectively,  reflecting decreases of 53% and 56%
over the comparable periods in the prior year. These decreases are primarily due
to  decreased  gross  profits and higher  selling,  general  and  administrative
expenses and financing costs.



LIQUIDITY AND CAPITAL RESOURCES

     Working capital increased  approximately $19 million during the nine months
ended  December 31, 2000  primarily as a result of the Company's  refinancing of
certain borrowings through the issuance of $30 million of Senior Unsecured Notes
(the "Notes")  which are scheduled for repayment  through  September  2010.  The
Company used the proceeds from the Notes to repay $20 million of Revolving  Bank
Loan borrowings and $10 million of a pre-existing $30 million Bank Term Loan. In
connection with this refinancing,  available borrowings under the Revolving Bank
Loan were  reduced  from $40  million to $25  million,  of which the Company had
borrowed $13.0 million as of December 31, 2000. On February 9, 2001, the Company
and the  holders of the Notes  amended  the Note  Purchase  Agreement  to revise
certain financial covenants retroactive to December 31, 2000.


     The  sale of the  Hewitt  house  contributed  over $7  million  to  working
capital.

     The  Company  has  historically   financed  its  growth  through  increased
borrowings and cash flow from operations.  During the nine months ended December
31,  2000,  the  Company's  primary uses of its capital has been to purchase the
Jade Mountain Brand name and continued capital projects at all facilities.


                                       11


<PAGE>

                          The Chalone Wine Group, Ltd.

ITEM 3.  DISCLOSURES ABOUT MARKET RISK

     You should read the following  disclosures in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations,  which
have been drafted in compliance  with  regulations of the SEC concerning the use
of "Plain  English." These  disclosures are intended to discuss certain material
risks of the  Company's  business  as they  appear to  management  at this time.
However,  this list is not exhaustive.  Other risks may, and likely will,  arise
from time to time.

     OUR REVENUES AND OPERATING RESULTS FLUCTUATE SIGNIFICANTLY FROM QUARTER TO
     --------------------------------------------------------------------------
     QUARTER
     -------

     We believe  period-to-period  comparisons of our operating  results are not
necessarily  meaningful,  and  cannot be  relied  upon as  indicators  of future
performance.  In addition, there can be no assurance that our revenues will grow
or be  sustained  in  future  periods  or  that  we will  maintain  our  current
profitability   in  the   future.   Significant   factors  in  these   quarterly
fluctuations,  none of which are within our  control,  are  changes in  consumer
demand for our wines,  the affect of weather and other natural forces on growing
conditions  and, in turn,  the quality  and  quantity of grapes  produced by us,
interest rates and other  business and economic  conditions.  Additionally,  our
sales volume tends to be affected by price  increases,  distributors'  inventory
levels and the timing of  releases  for  certain  wines,  among  other  factors.
Consequently,  we have  experienced,  and  expect  to  continue  to  experience,
seasonal fluctuations in revenues and operating results.

     A large  portion of our  expenses  are fixed and  difficult  to reduce in a
short period of time. In quarters  when  revenues do not meet our  expectations,
our  level of fixed  expenses  tends to  exacerbate  the  adverse  effect on net
income.  In quarters when our operating  results are below the  expectations  of
public  market  analysts  or  investors,  the price of our  common  stock may be
adversely affected.

     OUR BUSINESS IS SEASONAL
     ------------------------

     Our  business is subject to seasonal as well as quarterly  fluctuations  in
revenues and operating  results.  Our sales volume tends to increase  during the
summer months and the holiday season and decrease after the holiday season. As a
result,  our sales and earnings are typically highest during the fourth calendar
quarter and lowest in the first calendar  quarter.  Seasonal factors also affect
our level of borrowing.  For example, our borrowing levels typically are highest
during  winter  when  we  have to pay for  harvest  costs  and may  have to make
contractual  payments  to grape  growers.  These  and  other  factors  may cause
fluctuations in the market price of our common stock.

     OUR PROFITS DEPEND LARGELY ON SALES IN CERTAIN STATES AND ON SALES OF
     ---------------------------------------------------------------------
     CERTAIN VARIETALS
     -----------------

     In the nine months ended December 31, 2000,  approximately  73% of our wine
sales were  concentrated in 20 states.  Changes in national consumer spending or
consumer  spending in these states and other regions of the country could affect
both the  quantity  and price  level of wines  that  customers  are  willing  to
purchase.

     Approximately 90% of our consolidated net revenues in the nine months ended
December  31, 2000 were  concentrated  in our top four selling  varietal  wines.
Specifically,  sales of Chardonnay,  Pinot Noir,  Cabernet  Sauvignon and Merlot
accounted for 46%, 12%, 19% and 14% of our net revenues, respectively.

     COMPETITION MAY HARM OUR BUSINESS
     ---------------------------------

     The  premium  table  wine  industry  is  intensely  competitive  and highly
fragmented.  Our wines  compete in all of the premium wine market  segments with
many other  premium  domestic  and foreign  wines,  with  imported  wines coming
primarily  from the  Burgundy  and  Bordeaux  regions of France and, to a lesser
extent,  Italy,  Chile,  Argentina,  South Africa and Australia.  Our wines also
compete with  popular-priced  generic wines and with other  alcoholic  and, to a
lesser degree, non-alcoholic beverages, for shelf space in retail stores and for
marketing focus by our independent  distributors,  many of which carry extensive
brand portfolios.

     The wine industry has experienced  significant  consolidation.  Many of our
competitors have greater  financial,  technical,  marketing and public relations
resources  than we do.  Our sales may be harmed to the extent we are not able to
compete successfully against such wine or alternative beverage producers.

                                       12

<PAGE>


                          The Chalone Wine Group, Ltd.



     BAD WEATHER, PESTS AND PLANT DISEASES COULD HARM OUR BUSINESS
     -------------------------------------------------------------

     Winemaking  and grape  growing  are  subject to a variety  of  agricultural
risks.  Various diseases and pests and extreme weather conditions can materially
and  adversely  affect the quality and quantity of grapes  available to us. This
could reduce the quality or amount of wine we produce.  A  deterioration  in the
quality of our wines could harm our brand name, and a decrease in our production
could reduce our sales and profits. Future government restrictions regarding the
use of certain  materials  used in grape  growing may  increase  vineyard  costs
and/or reduce production.

     Grape growing  requires  adequate water supplies.  We generally  supply our
vineyards'  water needs through wells and reservoirs  located on our properties.
We believe that we currently  have adequate  water supplies to meet the needs of
all of our vineyards.  However, a substantial  reduction in water supplies could
result in material losses of grape crops and vines.

     Many California vineyards, including vineyards in Northern California, have
been infested  with  Phylloxera,  a root louse that renders a vine  economically
unproductive  within a few  years  after  infestation.  The  current  strain  of
Phylloxera  primarily  affects vines of a certain type. Our vineyard  properties
are  primarily  planted to  rootstocks  believed to be resistant to  Phylloxera.
However,  we cannot be certain that our existing  vineyards or the rootstocks we
are now using in our planting  and  replanting  programs  will not in the future
become  susceptible  to current or new strains of  Phylloxera,  plant insects or
diseases, any of which could harm our business.

     It is also possible that the vineyards  could be infested by new strains of
Phylloxera, insects, fungi, viruses or similar perils. For example, a new strain
of the sharpshooter  (glassy winged),  a flying insect that is believed to carry
Pierces'  Disease and can kill vines with which it comes into contact,  recently
was discovered in Southern California and is believed to be migrating north.

     Weather  fluctuations  in both rain levels and  seasonal  temperatures  can
impact the quality  and  quantity  of grapes  available  and can result in lower
volumes and higher costs.

     WE MAY NOT BE ABLE TO GROW OR ACQUIRE ENOUGH QUALITY GRAPES FOR OUR WINES
     -------------------------------------------------------------------------

     The adequacy of our grape supply is influenced by consumer  demand for wine
in relation to  industry-wide  production  levels.  While we believe that we can
secure  sufficient  supplies of grapes from a combination  of our own production
and from grape supply contracts with independent  growers,  we cannot be certain
that grape  supply  shortages  will not occur.  A shortage in the supply of wine
grapes could  result in an increase in the price of some or all grape  varieties
and a corresponding increase in our wine production costs.

     Current  trends in the domestic and foreign  wine  industry  point to rapid
plantings of new vineyards and replanting of old vineyards to greater densities,
with the expected  result of  significantly  increasing the worldwide  supply of
premium wine grapes and the amount of wine which will be produced in the future.
This expected  increase in grape  production could result in an excess of supply
over demand and force wineries to reduce, or not increase, prices.

     WE DEPEND ON THIRD PARTIES TO SELL OUR WINE
     -------------------------------------------

     We sell our products primarily through independent distributors and brokers
for resale to retail outlets,  restaurants,  hotels and private clubs across the
United  States and in some  overseas  markets.  To a lesser  degree,  we rely on
direct sales from our wineries,  our wine library and direct mail.  Sales to our
largest  distributor  and  to  our  nineteen  largest   distributors   combined,
represented  approximately 4% and 41%, respectively,  of our net revenues during
the  nine  months  ended  December  31,  2000.  Sales  to our  nineteen  largest
distributors are expected to continue to represent a substantial  portion of our
net  revenues in the future.  We use a single  broker in order to sell our wines
within  California.  Such sales  represent  33% of our net  revenues  during the
nine-month  period ended December 31, 2000. The laws and  regulations of several
states  prohibit   changes  of   distributors,   except  under  certain  limited
circumstances, making it difficult to terminate a distributor without reasonable
cause, as defined by applicable statutes. Any difficulty or inability to replace
distributors,  poor  performance of our major  distributors  or our inability to
collect accounts receivable from our major distributors could harm our business.

                                       13

<PAGE>


                          The Chalone Wine Group, Ltd.


     NEW REGULATIONS OR INCREASED REGULATORY COSTS COULD HARM OUR BUSINESS
     ---------------------------------------------------------------------

     The wine industry is subject to extensive  regulation by the Federal Bureau
of Alcohol,  Tobacco and Firearms  and various  foreign  agencies,  state liquor
authorities  and local  authorities.  These  regulations  and laws  dictate such
matters  as  licensing  requirements,  trade and  pricing  practices,  permitted
distribution  channels,   permitted  and  required  labeling,   advertising  and
relations  with  wholesalers  and  retailers.  Any  expansion  of  our  existing
facilities or development of new vineyards or wineries may be limited by present
and  future  zoning  ordinances,  environmental  restrictions  and  other  legal
requirements.  In addition,  new  regulations  or  requirements  or increases in
excise taxes, income taxes,  property and sales taxes or international  tariffs,
could reduce our profits. Future legal or regulatory challenges to the industry,
either individually or in the aggregate, could harm our business.

     WE WILL NEED MORE WORKING CAPITAL TO GROW
     -----------------------------------------

     The premium wine industry is a capital-intensive  business,  which requires
substantial capital expenditures to develop and acquire vineyards and to improve
or expand wine production.  Further, the farming of vineyards and acquisition of
grapes and bulk wine require  substantial amounts of working capital. We project
the  need  for  significant  capital  spending  and  increased  working  capital
requirements  over the next several  years,  which must be financed by cash from
operations or additional borrowings or other financing.

     ADVERSE PUBLIC OPINION ABOUT ALCOHOL MAY HARM OUR BUSINESS
     ----------------------------------------------------------

     A number of research  studies  suggest  that  various  health  benefits may
result from the moderate  consumption of alcohol, but other studies suggest that
alcohol  consumption  does not have any health benefits and may in fact increase
the risk of stroke,  cancer and other  illnesses.  If an  unfavorable  report on
alcohol  consumption gains general support,  it could harm the wine industry and
our business.

     WE USE PESTICIDES AND OTHER HAZARDOUS SUBSTANCES IN THE OPERATION OF OUR
     ------------------------------------------------------------------------
     BUSINESS
     --------

     We use  pesticides and other  hazardous  substances in the operation of our
business. If hazardous substances are discovered on, or emanate from, any of our
properties,  and their release presents a threat of harm to public health or the
environment, we may be held strictly liable for the cost of remediation. Payment
of such costs could have a material  adverse  effect on our business,  financial
condition and results of operations.  We maintain  insurance against these kinds
of risks, and others,  under various insurance policies.  However, our insurance
may not be adequate or may not  continue to be  available at a price or on terms
that are satisfactory to us.

     CONTAMINATION OF OUR WINES WOULD HARM OUR BUSINESS
     --------------------------------------------------

     We are  subject to certain  hazards and product  liability  risks,  such as
potential  contamination,  through  tampering or otherwise,  of  ingredients  or
products.  Contamination  of any of our  wines  could  result  in the need for a
product  recall  which could  significantly  damage our  reputation  for product
quality,  which we believe is one of our principle  competitive  advantages.  We
maintain  insurance  against  these kinds of risks,  and others,  under  various
general  liability  and  product  liability  insurance  policies.  However,  our
insurance  may not be adequate or may not continue to be available at a price or
on terms that are satisfactory to us.

     THE LOSS OF KEY EMPLOYEES WOULD DAMAGE OUR REPUTATION AND BUSINESS
     ------------------------------------------------------------------

     Our success depends to some degree upon the continued  services of a number
of key  employees.  Although some key employees are under  employment  contracts
with us for specific  terms,  the loss of the services of one or more of our key
employees  could harm our business and our  reputation,  particularly  if one or
more of our key  employees  resigns to join a competitor  or to form a competing
company. In such an event, despite provisions in our employment contracts, which
are designed to prevent the unauthorized disclosure or use of our trade secrets,
practices or procedures by such personnel under these circumstances, the Company
cannot be certain that it would be able to enforce  these  provisions or prevent
such disclosures.


                                       14


<PAGE>


                          The Chalone Wine Group, Ltd.


     SHIFTS IN FOREIGN EXCHANGE RATES OR THE IMPOSITION OF ADVERSE TRADE
     -------------------------------------------------------------------
     REGULATIONS COULD HARM OUR BUSINESS
     -----------------------------------

     We conduct some of our import and export  activity  for wine and  packaging
supplies in foreign currencies.  We purchase foreign currency on the spot market
on an as-needed  basis and engage in limited  financial  hedging  activities  to
offset the risk of exchange rate  fluctuations.  There is a risk that a shift in
certain foreign exchange rates or the imposition of unforeseen and adverse trade
regulations  could adversely impact the costs of these items and have an adverse
impact on our operating results.

     In addition,  the  imposition of unforeseen  and adverse trade  regulations
could have an adverse  effect on our  imported  wine  operations.  Export  sales
accounted  for  approximately  5% of total  consolidated  revenue  for the three
months ended  December 31, 2000.  The volume of  international  transactions  is
increasing and may increase these risks in the future.

     INFRINGEMENT OF OUR TRADEMARKS MAY DAMAGE OUR BRAND NAMES OR OUR BUSINESS
     -------------------------------------------------------------------------

     Our wines are branded consumer products,  and we distinguish our wines from
our competitors by enforcement of our trademarks. There can be no assurance that
competitors  will  refrain  from  infringing  our  marks  or  using  trademarks,
tradenames or trade dress which dilute our intellectual property rights, and any
such actions may require us to become  involved in  litigation  to protect these
rights.  Litigation  of this  nature can be very  expensive  and tends to divert
management's time and attention.


     OUR ACQUISITIONS AND POTENTIAL FUTURE ACQUISITIONS INVOLVE A NUMBER OF
     ----------------------------------------------------------------------
     RISKS
     -----

     Our acquisition of Staton Hills Winery (renamed  Sagelands  Winery) and the
possible  construction  of a new winery on the Suscol Ranch property we recently
acquired  (and  potential  future  acquisitions)  involve  risks  which  include
assimilating  these  operations  into our Company;  integrating,  retaining  and
motivating  key  personnel;  integrating  and managing  geographically-dispersed
operations  because  Staton  Hills is in  Washington  State and our  Company  is
headquartered in California;  integrating the technology and  infrastructures of
disparate  entities;  risks inherent in the production of wine in, and marketing
of wine from,  Washington  State; and the replanting of existing  vineyards from
white wine grapes to red wine grapes.

     We relied on debt financing to purchase Hewitt Ranch,  Suscol Ranch, Staton
Hills  Winery,  the Jade  Mountain  brand and other  vineyard  land and  related
assets.  Consequently  our  debt-to-equity  ratio  is  high in  relation  to our
historical standards. The interest costs associated with this debt will increase
our operating expenses and the risk of negative cash flow.

     THE MARKET PRICE OF OUR COMMON STOCK  FLUCTUATES
     ------------------------------------------------

     All of the  foregoing  risks,  among  others not known or mentioned in this
report, may have a significant  effect on the market price of our shares.  Stock
markets have experienced  extreme price and volume trading  volatility in recent
months and years.  This  volatility  has had a substantial  effect on the market
prices of  securities  of many  companies  for reasons  frequently  unrelated or
disproportionate  to the specific company's operating  performance.  These broad
market fluctuations may reduce the market price of our shares.


                                       15


<PAGE>


                          The Chalone Wine Group, Ltd.


PART II. - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits.

                  None

     (b) Reports.

                  None

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:   February 12, 2001                        THE CHALONE WINE GROUP, LTD.
--------------------------                        ----------------------------
                                                           (Registrant)


                                                  /s/ THOMAS B. SELFRIDGE
                                                  ------------------------------
                                                  Thomas B. Selfridge
                                                  President and Chief Executive
                                                  Officer




Dated:  February 12, 2001                         /s/ SHAWN CONROY BLOM
-------------------------                         ------------------------------
                                                  Shawn Conroy Blom
                                                  Vice President and Chief
                                                  Financial Officer


                                       16