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                        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 September 30, 1997

                                       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 November 11,
1997 was 7,676,421.

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<PAGE>

                          The CHALONE Wine Group, Ltd.

                         PART I. - FINANCIAL INFORMATION

     Item 1.  Financial Statements

         Incorporated herein is the following financial information:

              Consolidated  Balance  Sheets as of September 30, 1997,  and March
              31, 1997.

              Consolidated  Statements of  Operations  for the  three-month  and
              six-month periods ended September 30, 1997 and 1996.

              Consolidated  Statements of Changes in Financial  Position for the
              three-month  and six-month  periods  ended  September 30, 1997 and
              1996.

              Notes to Consolidated Financial Statements.


<PAGE>


                          The CHALONE Wine Group, Ltd.

                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


                                     ASSETS
                                                          Sept. 30,   March 31,
                                                            1997         1997
                                                         (unaudited)
                                                           --------    --------
 Current Assets:
   Cash ................................................   $    122    $    246
    Accounts receivable, less allowance for
       doubtful accounts of $92 thousand and
       $71 thousand, respectively ......................      6,235       3,944
    Notes receivable ...................................         93       1,291
    Distribution receivable ............................       --           382
    Note receivable from officer .......................         28          83
    Inventory ..........................................     30,360      28,231
    Prepaid expenses ...................................        260         219
    Deferred income taxes ..............................         23          23
                                                           --------    --------
       Total current  assets ...........................     37,121      34,419
Investment in Chateau Duhart-Milon .....................     10,116      10,372
Notes receivable, long-term portion ....................        394         398
Property, plant & equipment, net .......................     28,454      24,763
Goodwill and trademarks ................................      5,508       5,591
Other assets ...........................................        351         316
                                                           --------    --------
       Total  assets ...................................   $ 81,944    $ 75,859
                                                           ========    ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Bank lines of credit ...............................   $ 11,597    $  7,771
    Current maturities of long-term obligations ........        557         564
    Accounts payable and accrued liabilities ...........      3,720       1,801
                                                           --------    --------
       Total current liabilities .......................     15,874      10,136
Long-term obligations, less current maturities .........      8,788       9,879
Convertible subordinated debentures ....................      8,500       8,500
Deferred income taxes ..................................      1,318       1,318
Minority interest ......................................      3,551       3,191
                                                           --------    --------
       Total liabilities ...............................     38,031      33,024
                                                           --------    --------
Shareholders' equity:
    Common stock .......................................     41,897      41,841
    Retained  earnings .................................      4,054       2,583
    Cumulative foreign currency translation adjustment .     (2,038)     (1,589)
                                                           --------    --------
       Total shareholders equity .......................     43,913      42,835
                                                           --------    --------
       Total liabilities and shareholders' equity ......   $ 81,944    $ 75,859
                                                           ========    ========


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

                                       3

<PAGE>


                          The CHALONE Wine Group, Ltd.
<TABLE>
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (unaudited)(in thousands, except per-share data)


<CAPTION>
                                              Three Months             Six Months
                                                 Ended                   Ended
                                              September 30,           September 30,
                                          --------    --------    --------    --------
                                             1997       1996        1997        1996
                                          --------    --------    --------    --------

<S>                                       <C>         <C>         <C>         <C>     
Gross revenues ........................   $  9,250    $  8,207    $ 17,537    $ 16,656
Less excise taxes .....................        243         276         454         511
                                          --------    --------    --------    --------
      Net revenues ....................      9,007       7,931      17,083      16,145

Cost of wines sold ....................      5,224       4,774       9,882       9,818
                                          --------    --------    --------    --------
      Gross profit ....................      3,783       3,157       7,201       6,327

Operating expenses ....................      1,838       1,448       3,758       3,155
                                          --------    --------    --------    --------
      Operating income ................      1,945       1,709       3,443       3,172
                                          --------    --------    --------    --------

Other income (expenses):
   Interest ...........................       (518)       (440)       (973)       (831)
   Other, net .........................        168          14         187          27
                                          --------    --------    --------    --------
                                              (350)       (426)       (786)       (804)
Equity in net income of Ch.Duhart-Milon       --            40         193         188

Minority interests ....................       (255)       (192)       (398)       (320)
                                          --------    --------    --------    --------
      Income before income taxes ......      1,340       1,131       2,452       2,236
                                          --------    --------    --------    --------

Income tax expense ....................       (536)       (463)       (981)       (915)
                                          --------    --------    --------    --------
      Net income ......................   $    804    $    668    $  1,471    $  1,321
                                          ========    ========    ========    ========

      Net income per common share .....   $   0.10    $   0.08    $   0.18    $   0.16

      Average number of shares used
         in income per share comp .....      8,283       8,073       8,370       8,115

<FN>
                   The accompanying notes are an integral part
                    of the consolidated financial statements
</FN>
</TABLE>

                                       4

<PAGE>

                          The CHALONE Wine Group, Ltd.
<TABLE>
            CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
                            (unaudited)(in thousands)

<CAPTION>
                                                      Three Months          Six Months
                                                          Ended                Ended
                                                      September 30,        September 30,
                                                   ---------  --------   ---------  ---------
                                                      1997      1996        1997       1996
                                                   ---------  --------   ---------  ---------
<S>                                                 <C>        <C>        <C>        <C>    
 Cash flows from operating activities:
    Net earnings ................................   $   804    $   668    $ 1,471    $ 1,321
  Non-cash transactions included in earnings:
     Depreciation ...............................       364        332        745        641
     Amortization ...............................        41         28         86         59
     Equity in Chateau Duhart-Milon .............      --          (40)      (193)      (188)
     Increase in minority interest ..............       255        192        398        320
     Exchange rate loss .........................         9       --         --         --
     Loss on sale of equipment ..................         1         65          3         70
    Changes in:
       Deferred income taxes ....................      --          463       --          915
       Accounts receivable ......................      (756)       826       (664)    (1,416)
       Inventory ................................    (2,045)    (1,590)    (2,129)       237

       Prepaid expenses and other assets ........      --         (305)       (68)      (346)
       Accounts payable and accrued expenses ....     1,646        724      1,919      1,553
                                                    -------    -------    -------    -------
      Net cash provided by operating activities .       319      1,363      1,568      3,166
                                                    -------    -------    -------    -------

Cash flows from investing activities:
   Capital expenditures .........................    (2,520)    (3,558)    (4,539)    (6,081)
   Net change in notes receivable ...............      (125)      --         --            3
   Investment in Duhart-Milon ...................      --          (13)      --          (13)
   Proceeds from disposal of equipment ..........        95         38        100        105
                                                    -------    -------    -------    -------
      Net cash used in investing activities .....    (2,550)    (3,533)    (4,439)    (5,986)
                                                    -------    -------    -------    -------

Cash flows from financing activities:
   Net change under line of credit agreement ....     2,968       (547)     3,826       (499)
   Repayment of long-term debt ..................      (760)       (72)    (1,097)      (415)
   Proceeds from issuance of long-term  debt ....      --        2,782       --        3,732
   Distribution to minority interest ............      --         --          (38)      --
   Net proceeds from issuance of common stock ...        11         39         56         58
                                                    -------    -------    -------    -------
      Net cash provided by financing activities .     2,219      2,202      2,747      2,876
                                                    -------    -------    -------    -------

      Net increase (decrease) in cash ...........       (12)        32       (124)        56
      Cash at beginning of period ...............       134         26        246          2
                                                    -------    -------    -------    -------
Cash at end of period ...........................   $   122    $    58    $   122    $    58
                                                    =======    =======    =======    =======


<FN>
                   The accompanying notes are an integral part
                    of the consolidated financial statements
</FN>
</TABLE>

                                       5

<PAGE>

                          The CHALONE Wine Group, Ltd.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - Consolidated Financial Statements
         The   consolidated   balance  sheet  as  of  September  30,  1997,  the
consolidated  statement of operations for the  three-month and six month periods
ended September 30, 1997 and 1996, and the consolidated  statement of changes in
financial  position for the  three-month  and six month  periods then ended have
been prepared by the Company,  without audit. In the opinion of management,  all
adjustments  (which  include  only normal  recurring  adjustments)  necessary to
present  fairly the Company's  financial  position,  results of  operations  and
changes in  financial  position  at  September  30,  1997,  and for all  periods
presented have been made.
         Certain  information  and  footnote  disclosures  normally  included in
financial  statements  prepared in accordance with generally accepted accounting
principles  have  been  condensed  or  omitted.   It  is  suggested  that  these
consolidated  financial  statements  be read in  conjunction  with the financial
statements and notes included in the Company's March 31, 1997 audited  financial
statements.

NOTE 2 - Seasonal Factors
         The results for the interim periods are not  necessarily  indicative of
the results to be expected for the year, due to seasonal factors.

                                       6

<PAGE>

                          The CHALONE Wine Group, Ltd.

<TABLE>
Item 2.    Management's Discussion and Analysis
           of Financial Condition and Results of Operations

RESULTS OF OPERATIONS
         The following  table sets forth the percentage  relationship to revenue
of certain items in the Company's  statements of operations for the  three-month
and six month periods  ended  September  30, 1997 and 1996,  and the  percentage
change in such items between the comparable periods in those years.

<CAPTION>
                                                      Three Months Ended Sept. 30,       Six Months Ended Sept. 30,
                                                   ---------------------------------- -------------------------------
                                                      Percentage of        Percent        Percentage of     Percent
                                                       Wine Sales          Change           Wine Sales      Change
                                                   ---------------------------------- -------------------------------
                                                       1997       1996     97 vs 96      1997      1996     97 vs 96
                                                   ----------- --------- ------------ --------- --------- -----------

<S>                                                   <C>        <C>          <C>      <C>       <C>           <C>  
    Net revenues ................................     100.0 %    100.0 %      13.6 %   100.0 %   100.0 %       5.8 %
 Cost of wines sold .............................      58.0 %     60.2 %       9.4 %    57.8 %    60.8 %       0.7 %
                                                   ----------- ----------             --------- ---------
    Gross profit.................................      42.0 %     39.8 %      19.8 %    42.2 %    39.2 %      13.8 %

 Operating  expenses ............................      20.4 %     18.3 %      26.9 %    22.0 %    19.5 %      19.1 %
                                                   ----------- ----------             --------- ---------
    Operating income ............................      21.6 %     21.5 %      13.8 %    20.2 %    19.6 %       8.5 %
                                                   ----------- ----------             --------- ---------

 Other income (expenses):
    Interest ....................................      (5.8)%     (5.5)%      17.7 %    (5.7)%    (5.1)%      17.1 %
    Other, net ..................................       1.9 %      0.2 %   1.100.0 %     1.1 %     0.2 %     592.6 %
                                                   ----------- ----------             --------- ---------
                                                       (3.9)%     (5.4)%     (17.8)%    (4.6)%    (5.0)%      (2.2)%
 Equity in net income ...........................        --        0.5 %    (100.0)%     1.1 %     1.2 %       2.7 %
 Minority interests .............................      (2.8)%     (2.4)%      32.8 %    (2.3)%    (2.0)%      24.4 %
                                                   ----------- ----------             --------- ---------
    Income before inc. taxes ....................      14.9 %     14.3 %      18.5 %    14.4 %    13.8 %       9.7 %
                                                   ----------- ----------             --------- ---------

 Income tax expense .............................      (6.0)%     (5.8)%      15.8 %    (5.7)%    (5.7)%       7.2 %
                                                   ----------- ----------             --------- ---------
    Net income ..................................       8.9 %      8.4 %      20.4 %     8.6 %     8.2 %      11.4 %
                                                   =========== ==========             ========= =========
</TABLE>

Wine Sales
     Sales for the  three  months  and six  months  ended  September  30,  1997,
increased approximately 14% and 6%, respectively, over the comparable periods in
1996. The number of cases sold in the six months ended September 30, 1997 was 4%
less than the  comparable  period in 1996 due to a shortage of some wines.  This
was more than offset by an increase in the average per case  realization of over
10% for the same period.

Gross Profit
     Gross profit for the three months and six months ended  September 30, 1997,
increased  by  approximately  20% and 14%,  respectively,  over  the  comparable
periods in 1996,  primarily as a result of the increased  per case  realizations
mentioned above.

Operating Expenses
     Operating expenses for the three months and six months ending September 30,
1997  increased by 27% and 19%,  respectively,  over the  comparable  periods in
1996.  This increase is primarily  the result of planned  increases in marketing
expenditure  and  increases  in  selling  expenses  related to  increased  sales
revenue.

                                       7

<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 six months ended  September  30,
1997,  increased by 14% and 9%,  respectively,  from the  comparable  periods in
1996.  This  increase  was due to  higher  gross  profit,  offset  by  increased
operating expenses, both discussed above.

Other Income (Expenses)
     Net interest  expense for the three  months and six months ended  September
30, 1997, increased by 18% and 17%, respectively, from the comparable periods in
1996, due to higher borrowings due to the financing on vineyards acquired in the
end of 1996, and increased working capital requirements in 1997.
     Net other income for the three months and six months  ended  September  30,
1997 increased by $154,000 and $173,000, respectively,  primarily as a result of
increased  crushing fees for third party wineries  during the three months ended
September 30, 1997.

Equity in Net Income of Chateau Duhart-Milon
     The Company's  23.5% equity interest in  Duhart-Milon's  net income for the
six months ended  September 30, 1997,  was $193,000,  as compared to $188,000 in
the comparable period in 1996. During the three months ended September 30, 1997,
no net income was recognized,  while the comparable period in 1996 reflected net
income of $40,000.
       The 1997 results, therefore, indicate similar trends as those experienced
in 1996, during which time Duhart-Milon's sales activity was lowest in the three
month period ended June September 30, 1996.
     The investment in Duhart is denominated in French Francs and accordingly, a
reserve  for  currency  translation  is  recorded  in the equity  section of the
balance sheet and serves to reduce the balance of the investment. The reserve as
of September 30, 1997, was $2,038,000,  due to the declining value of the French
Franc since early 1996.

<TABLE>
Minority Interest
     The  Company  currently  has two  ventures  in which  there  is a  minority
interest.  The "minority  interest" in earnings of these  ventures for the three
months and six months ended September 30, 1997, consisted of the following:

<CAPTION>
                                                                             Minority Interest in Earnings
                                                                           ---------------------------------
                                                                              3 Months          6 Months
                                                               Minority         Ended             Ended
Venture                            Minority Owner               Percent     Sept. 30, 1997    Sept. 30, 1997
-------                            --------------              --------     --------------    --------------
<S>                                <C>                           <C>           <C>              <C>     
Edna Valley Vineyard (EVV)         Paragon Vineyard Co., Inc     50.0%         $235,052         $355,780
Canoe Ridge Vineyard, LLC (CRV)    Various                       49.5%           19,897           41,994
                                                                               --------         --------
                                                                               $254,949         $397,774
                                                                               ========         ========
</TABLE>

     The minority  interest in earnings for EVV during the  three-month  and six
month periods of 1997 reflects increases of 47% and 43%, respectively,  from the
comparable  periods in 1996.  This is  primarily  the result of an  increase  in
average case  realizations and the resulting  increase in gross margin per case.
The minority interest in earnings for CRV during the three months and six months
ending September 30, 1997 reflects decreases of 37% and 40%, respectively,  over
the comparable  periods in 1996. This is primarily due to higher financing costs
incurred in 1997 as a result of planned increases in working capital.

                                       8

<PAGE>

                          The CHALONE Wine Group, Ltd.

Item 2.    Management's Discussion and Analysis
           of Financial Condition and Results of Operations (Continued)

Minority Interest (Continued)
     The Company  believes that Edna Valley Vineyard will continue to contribute
significantly to its income,  and hence that the minority interest will continue
to increase in the future.  Management  also believes  that CRV will  contribute
more income, and that the minority interest will, therefore, increase.

Net Income
     Net income for the three  months and six months ended  September  30, 1997,
was $804,000 and $1,471,000,  respectively,  reflecting increases of 20% and 11%
over the comparable periods in 1996.

SEASONALITY
         The  Company's  wine sales from quarter to quarter are highly  variable
because the exact dates when wines are released for sale vary from year to year.
Sales are typically  highest  during the last three months of the calendar year,
due to heavy holiday sales and because most wines are released around  September
and October of each year.

LIQUIDITY AND CAPITAL RESOURCES
         The Company's  working  capital  decreased  $1,686,000 and  $3,036,000,
respectively,  during the three-month and six month periods ending September 30,
1997, to $21,247,000. These decreases of 7% and 13%, respectively, are primarily
due to increased  spending on capital  expenditures for vineyard  development at
four of the Company's  properties  and a new  hospitality  center at Edna Valley
Vineyard.
         Effective August 1, 1997, the Company  renegotiated its lines of credit
and term  financing  with Wells Fargo Bank.  The new credit  agreements  are for
comparable  borrowing  limits to the previous  agreements,  but have changed the
rates from prime to prime less .5%. This  agreement will be in effect until July
31, 1999.
     At November 7, 1997, the Company had lines of credit  totaling  $16,300,000
of which $11,774,000 had been drawn.
         The Company is not aware of any potential  impairments to its liquidity
and  believes  that its capital  resources  are adequate to meet the current and
historic levels of capital expenditures and liquidity needs of the Company.

                                       9

<PAGE>

                          The CHALONE Wine Group, Ltd.

                          PART II. - OTHER INFORMATION

Item 5. Other Information

     Effective  January 1, 1998, Tom Selfridge will join the Chalone Wine Group,
Ltd., as President.  Philip Woodward,  current President, will continue as Chief
Executive Officer and Chairman of the Board.


Item 6. Exhibits and Reports on Form 8-K

    (a) Exhibits.  Not applicable.

    (b) Reports.  None.

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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.

                                                    The CHALONE Wine Group, Ltd.


Dated:  November 13, 1997                           BY /s/ William L. Hamilton
                                                      ------------------------
                                                    William L. Hamilton
                                                    Executive Vice President
                                                    and Chief Financial Officer

                                       10