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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 June 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 July 28, 1997
was 7,661,793.
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<PAGE>

                          The CHALONE Wine Group, Ltd.

                         PART I. - FINANCIAL INFORMATION

     Item 1.  Financial Statements

         Incorporated herein is the following unaudited financial information:

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

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

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

              Notes to Consolidated Financial Statements.

<PAGE>
                          The CHALONE Wine Group, Ltd.

                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                     ASSETS
                                                             June 30,  March 31,
                                                               1997      1997
                                                          (unaudited)
                                                              -------  -------
Current assets
     Cash .................................................$   134    $   246
     Accounts receivable, less allowance for                          
       doubtful accounts of $84,070 and $70,550,                        
       respectively .......................................   4,234      3,944
     Notes receivable .....................................   1,225      1,291
     Distribution receivable ..............................    --          382
     Note receivable from officer .........................      28         83
     Inventories ..........................................  28,315     28,231
     Prepaid expenses .....................................     257        219
     Deferred income taxes ................................      23         23
                                                            -------    -------
         Total current assets .............................  34,216     34,419
     Investment in Chateau Duhart-Milon ...................  10,199     10,372
     Notes receivable, long-term portion ..................     394        398
     Property, plant and equipment - net ..................  26,394     24,763
     Goodwill and trademarks ..............................   5,549      5,591
     Other assets .........................................     343        316
                                                            -------    -------
              Total assets ................................ $77,095    $75,859
                                                            =======    =======

                LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
     Bank lines of credit ................................ $  8,629   $  7,771
     Current maturities of long-term obligations .........      580        564
     Accounts payable and accrued liabilities ............    2,074      1,801
                                                           --------   --------
         Total current liabilities .......................   11,283     10,136
Long-term obligations - less current maturities ..........    9,526      9,879
Convertible subordinated debentures ......................    8,500      8,500
Deferred income taxes ....................................    1,318      1,318
Minority interest ........................................    3,296      3,191
Shareholders' equity                                 
   Common stock ..........................................   41,886     41,841
   Retained earnings (deficit) ...........................    3,250      2,583
   Cumulative foreign currency translation adjustment ....   (1,964)    (1,589)
                                                           --------   --------
         Total shareholders' equity ......................   43,172     42,835
                                                           --------   --------
         Total liabilities and shareholders' equity ...... $ 77,095   $ 75,859
                                                           ========   ========
                   The accompanying notes are an integral part
                    of the consolidated financial statements

                                       3
<PAGE>
                          The CHALONE Wine Group, Ltd.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (unaudited)(in thousands, except per-share data)



                                                            Three Months Ended
                                                                 June 30,
                                                           --------------------
                                                             1997         1996
                                                           -------      -------
Gross revenues ........................................... $ 8,287      $ 8,449
     Less excise taxes ...................................     211          235
                                                           -------      -------
Net revenues .............................................   8,076        8,214
Cost of wines sold .......................................   4,658        5,044
                                                           -------      -------
     Gross profit ........................................   3,418        3,170
Selling, general and administrative expenses .............   1,920        1,707
                                                           -------      -------
     Operating income ....................................   1,498        1,463
Other income (expense)
     Interest expense ....................................    (455)        (391)
     Other, net ..........................................      19           13
                                                           -------      -------
                                                              (436)        (378)
Equity in net income of Chateau Duhart-Milon .............     193          148
Minority interests .......................................    (143)        (128)
                                                           -------      -------
     Income before income taxes ..........................   1,112        1,104
Income tax expense .......................................    (445)        (451)
                                                           -------      -------

     Net income .......................................... $   667      $   653
                                                           =======      =======


Net income per common share .............................. $   .08      $   .08
Average number of shares used in income
  per share computation ..................................   8,456        8,158




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

                                       4
<PAGE>
                          The CHALONE Wine Group, Ltd.

            CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
                            (unaudited)(in thousands)



                                                            Three Months Ended
                                                                  June 30,
                                                           ---------------------
                                                             1997         1996
                                                           -------      -------
Cash flows from operating activities:
   Net earnings ......................................     $   667      $   653
   Non-cash transactions included in earnings:
     Depreciation ....................................         381          309
     Amortization ....................................          45           31
     Equity in net income of Chateau Duhart-Milon ....        (193)        (148)
     Increase in minority interest ...................         143          128
     Exchange rate gain ..............................          (9)        --
     Loss on sale of equipment .......................           2            5
     Changes in:
       Deferred income taxes .........................        --            452
       Accounts receivable ...........................          92       (2,242)
       Inventories ...................................         (84)       1,827
       Prepaid expenses and other assets .............         (68)         (41)
       Accounts payable and accrued expense ..........         273          829
                                                           -------      -------
       Net cash provided by operating
         activities ..................................       1,249        1,803
                                                           -------      -------

Cash flows from investing activities:
     Capital expenditures ............................      (2,019)      (2,523)
     Net decrease in notes receivable ................         125            3
     Proceeds from disposal of equipment .............           5           67
                                                           -------      -------
     Net cash used in investing activities ...........      (1,889)      (2,453)
                                                           -------      -------

Cash flows from financing activities:
   Net repayments under line of credit agreement .....         858          (48)
   Repayment of long-term debt .......................        (337)        (343)
   Proceeds from issuance of long-term debt ..........        --            950
   Distribution to minority interest .................         (38)        --
   Net proceeds from issuance of common stock ........          45           19
   Purchase and retirement of common stock ...........        --           --
                                                           -------      -------
     Net cash provided by financing activities .......         528          674
                                                           -------      -------

Net increase (decrease) in cash ......................        (112)          24
   Cash at beginning of year .........................         246            2
                                                           -------      -------
     Cash at end of period ...........................     $   134      $    26
                                                           =======      =======


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

                                       5
<PAGE>
                          The CHALONE Wine Group, Ltd.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - Consolidated Financial Statements
         The  consolidated  balance sheet as of June 30, 1997, the  consolidated
statement of operations for the three-month period ended June 30, 1997 and 1996,
and  the  consolidated  statement  of  changes  in  financial  position  for the
three-month period 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  position,   results  of
operations  and  changes in  financial  position at June 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.

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
period  ended June 30, 1997 and 1996,  and the  percentage  change in such items
between the comparable periods in those years.

                                                     Three Months Ended June 30,
                                                    ----------------------------
                                                      Percentage        Percent
                                                      of Wine Sales     Change
                                                    -----------------  ---------
                                                                        1996 vs.
                                                     1997       1996      1997
                                                    ------     ------   -------
Net revenues ...................................    100.0%     100.0%     (1.7%)
Cost of wine sold ..............................     57.7       61.4      (7.7)
                                                    ------     ------
   Gross profit ................................     42.3       38.6       7.8
Selling, general & administrative expenses .....     23.8       20.8      12.5
                                                    ------     ------
   Operating income ............................     18.5       17.8       2.4
Other income (expense)
   Interest expense ............................     (5.6)      (4.8)     16.4
   Other, net ..................................      0.2        0.2      46.2
Equity in net income of Ch. Duhart-Milon .......      2.4        1.8      30.4
Minority interests .............................     (1.8)      (1.6)     11.7
                                                    ------     ------
   Income (loss) before income taxes ...........     13.7       13.4       0.7
Income taxes ...................................     (5.5)      (5.5)     (1.3)
                                                    ------     ------
     Net earnings (loss) .......................      8.2        7.9       2.1
                                                    ======     ======

Wine Sales
     Sales for the three months ended June 30, 1997, increased  approximately 2%
over the  comparable  period  in 1996.  The  number  of cases  sold in the first
quarter was 9% 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 periods.

Gross Profit
     Gross  profit  for the three  months  ended  June 30,  1997,  increased  by
approximately 8% over the comparable  period in 1996,  resulting  primarily from
the increased per case realizations mentioned above.

Selling, General and Administrative Expenses
     Selling,  general and  administrative  expenses for the three months ending
June 30, 1997 increased by 13% over the comparable period in 1996. This increase
is primarily the result of planned increases in marketing expenditures.

Operating Income
     Operating  income for the three months  ended June 30,  1997,  increased by
over 2% from the  comparable  period in 1996.  This  increase  was due to higher
gross profit as discussed above.

                                       7
<PAGE>
                          The CHALONE Wine Group, Ltd.

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

Other Income (Expense)
Net interest expense for the three months ended June 30, 1997,  increased by 16%
from the comparable  period in 1996,  due primarily to higher  borrowings due to
the financing on vineyards acquired in the second half of 1996.

Equity in Net Income of Chateau Duhart-Milon
     The Company's  23.5% equity interest in  Duhart-Milon's  net income for the
three months  ended June 30,  1997,  was $193,000 as compared to $148,000 in the
comparable  period in 1996.  This 30% increase is primarily  attributable to the
exceptionally  strong demand for Bordeaux wines and  corresponding  increases in
prices of the wines.

Minority Interest
     The  Company  currently  has two  ventures  in which  there  is a  minority
interest. The "minority interest" in earnings (losses) of these ventures for the
three months ended June 30, 1997, consisted of the following:

                                                                       Minority
                                                                     Interest in
Venture                            Minority Owner         Minority     Earnings
-------                            --------------            %          (Loss)
                                                            ----        --------
Edna Valley Vineyard (EVV)       Paragon Vineyard Co., Inc.  50%       $ 120,728
Canoe Ridge Vineyard, LLC (CRV)  Various                    49.5%         22,097
                                                                       ---------
                                                                       $ 142,825
                                                                       =========

     The minority interest in earnings for EVV during the three-month  period of
1997 represents an increase of 35% from the comparable period in 1996, resulting
from 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  ending  June  30,  1997  represents  a  decrease  of 43% over the
comparable period in 1996. This is due to CRV having "sold out" of wines and its
next  release not being  available  until June 1997.

     The  minority  interest in earnings  for Edna  Valley  Vineyard  during the
three-month  period of 1996  represents  a decrease  of 24% from the  comparable
period in 1995,  and was due to lower sales of custom  branded wines produced at
EVV. Effective January 1, 1996, CanoeCo and Canoe Ridge Winery (CRW) merged into
one new Company, Canoe Ridge Vineyard LLC, which the Company owns 50.5%. CRW had
its first (and only)  complete year of operation in 1995, and  essentially  sold
its  entire  vintage  in that  year.  Consequently  until the next  vintage  was
released in June of 1996,  with only limited  amounts of wine available for sale
by CRV, the three months period ending June 30, 1996 resulted in a small loss.

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

Net Income

     Net income for the three  months  ended June 30,  1997,  was  $667,000,  an
increase of 2% over the comparable period in 1996.

                                       8
<PAGE>
                          The CHALONE Wine Group, Ltd.

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

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 third quarter,  because of heavy holiday
sales and  because  most  wines are  released  around  the end of the second and
beginning of the third quarters.

LIQUIDITY AND CAPITAL RESOURCES
         The Company's working capital decreased $909,000 during the three-month
period ending June 30, 1997, to  $23,374,000.  This 4% decrease is primarily due
to increased spending on capital  expenditures for vineyard  development at four
of our 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 July 25, 1997, the Company had lines of credit totaling  $16,300,000
of which $9,444,415 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 4.       Submission of Matters to a Vote of Security Holders
         The  Company's  1997  Annual  Meeting of  Shareholders  was held at the
Company's  executive  offices,  621 Airpark Road, Napa,  California,  on May 16,
1997.  In  attendance,  in  person  or by  proxy,  were  7,009,654  shares,  or,
approximately  91.6% of total shares  outstanding.  The  following  actions were
taken:

         Election of Directors.  All nine  positions on the  Company's  Board of
Directors were to be filled for new one-year  terms,  and all nominees were duly
elected,  each nominee  receiving in excess of 99% of total  shares  voted.  The
directors thus elected, with the precise votes for and against, were:
                       Director                          For             Against
                       --------                          ---             -------
                  Richard H. Graff                   6,961,089            48,565
                  W. Philip Woodward                 6,989,104            20,550
                  William L. Hamilton                6,962,423            47,231
                  Mark Hojel                         6,986,005            23,649
                  Yves-Adres Istel                   6,879,829           129,825
                  C. Richard Kramlich                6,988,704            20,950
                  William Myers                      6,989,529            20,125
                  James H. Niven                     6,986,711            22,943
                  Philip Plant                       6,988,030            21,624
                  Eric de Rothschild                 6,874,345           135,309
                  Christophe Salin                   6,988,904            20,750

         Approval of Company's 1997 Stock Option Plan. The Board's submission of
the 1997 Stock Option Plan  received due  ratification,  with  5,719,404  shares
voting for, 263,617 shares voting against, and 36,612 shares abstaining.

         Appointment of Auditors. The Board's reappointment of Deloitte & Touche
as the Company's  certified public accountants  received due ratification,  with
6,977,591  shares voting for,  20,915 shares voting  against,  and 11,148 shares
abstaining.

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:  August 12, 1997                             BY /s/ William L. Hamilton
                                                      ------------------------
                                                    William L. Hamilton
                                                    Executive Vice President
                                                    and Chief Financial Officer

                                       10