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                                  UNITED STATES
                       SECURITIES AND 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, 1996

                                       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 0-14466

          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)

                 Connecticut                         06-1115374
           (State of Organization)      (I.R.S. Employer Identification No.)


                     900 Cottage Grove Road, South Building
                          Bloomfield, Connecticut 06002
                    (Address of principal executive offices)


                        Telephone Number: (860) 726-6000



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


                                       1

<PAGE>

<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION

          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (A CONNECTICUT LIMITED PARTNERSHIP)

                                 BALANCE SHEETS
                                                                                     SEPTEMBER 30,             DECEMBER 31,
                                                                                         1996                      1995
                                                               ASSETS                 (UNAUDITED)                (AUDITED)
<S>                                                                               <C>                       <C> 
Property and improvements, at cost:
     Land and land improvements                                                   $     4,162,351           $     6,119,148
     Buildings                                                                         25,430,458                30,577,342
     Furniture and fixtures                                                             2,036,740                 2,206,128
                                                                                  ---------------           ---------------
                                                                                       31,629,549                38,902,618
     Less accumulated depreciation                                                     11,200,757                12,770,211
                                                                                  ---------------           ---------------
              Net property and improvements                                            20,428,792                26,132,407

Cash and cash equivalents                                                               2,252,954                 2,481,123
Accounts receivable (net of allowance of $8,333
   in 1996 and $8,671 in 1995)                                                              9,429                     7,694
Escrow deposits                                                                           211,888                   281,236
Other asset                                                                                 1,000                     1,000
Deferred charges, net                                                                   1,181,281                 1,329,140
Escrowed debt service funds                                                               506,660                   506,660
                                                                                  ---------------           ---------------
              Total                                                               $    24,592,004           $    30,739,260
                                                                                  ===============           ===============

                   LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

Liabilities:
     Notes and mortgages payable                                                  $    20,878,052           $    29,347,622
     Accounts payable and accrued expenses (including $43,199
       in 1996 and $10,001 in 1995 due to affiliates)                                     258,584                   361,508
     Accrued interest payable (including
       $17,000 in 1995 due to affiliates)                                                      --                    72,946
     Tenant security deposits                                                             146,272                   169,396
     Unearned income                                                                       20,178                    25,973
                                                                                  ---------------           ---------------
              Total liabilities                                                        21,303,086                29,977,445
                                                                                  ---------------           ---------------

Partners' capital (deficit):
     General Partner:
         Capital contributions                                                              1,000                     1,000
         Cumulative net loss                                                               12,546                  (102,765)
         Cumulative cash distributions                                                    (13,355)                  (13,355)
                                                                                  ---------------           ---------------
                                                                                              191                  (115,120)
                                                                                  ---------------           ---------------
     Limited partners (24,856 Units)
         Capital contributions, net of offering costs                                  22,408,052                22,408,052
         Cumulative net loss                                                          (17,786,175)              (20,197,967)
         Cumulative cash distributions                                                 (1,333,150)               (1,333,150)
                                                                                  ---------------           ---------------
                                                                                        3,288,727                   876,935
                                                                                  ---------------           ---------------
              Total partners' capital                                                   3,288,918                   761,815
                                                                                  ---------------           ---------------
              Total                                                               $    24,592,004           $    30,739,260
                                                                                  ===============           ===============


                             The Notes to Financial  Statements  are an integral part of these statements.

                                                                 2
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (A CONNECTICUT LIMITED PARTNERSHIP)

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                                     THREE MONTHS ENDED                     NINE MONTHS ENDED
                                                                       SEPTEMBER 30,                          SEPTEMBER 30,
                                                                   1996             1995                  1996              1995
<S>                                                         <C>              <C>                   <C>               <C> 
Income:
     Rental income                                          $   1,164,852    $    1,385,732        $    3,773,620    $   4,062,608
     Other income                                                  27,372            51,593               100,738          159,553
     Interest income                                               32,627            40,562               114,651          109,635
                                                            -------------    --------------        --------------    -------------
                                                                1,224,851         1,477,887             3,989,009        4,331,796
                                                            -------------    --------------        --------------    -------------

Expenses:
     Property operating expenses                                  350,034           416,303             1,101,336        1,175,428
     General and administrative                                   161,804           193,389               529,038          585,873
     Fees and reimbursements to affiliates                         22,345            30,880                73,063           75,459
     Interest expense (includes $-0- and
       $25,500 for 1996 and $17,000 and
       $51,000 for 1995 to affiliates)                            372,609           554,513             1,366,070        1,664,108
     Depreciation and amortization                                278,435           334,981               832,657          996,285
                                                            -------------    --------------        --------------    -------------
                                                                1,185,227         1,530,066             3,902,164        4,497,153
                                                            -------------    --------------        --------------    -------------

              Income (loss) from operations                        39,624           (52,179)               86,845         (165,357)

Gain on sale of property                                               --                --             2,440,258               --
                                                            -------------    --------------        --------------    -------------

              Net income (loss)                             $      39,624    $      (52,179)       $    2,527,103    $    (165,357)
                                                            =============    ==============        ==============    =============

Net income (loss):
     General Partner                                        $         396    $         (522)       $      115,311    $      (1,654)
     Limited partners                                              39,228           (51,657)            2,411,792         (163,703)
                                                            -------------    --------------        --------------    -------------
                                                            $      39,624    $      (52,179)       $    2,527,103    $    (165,357)
                                                            =============    ==============        ==============    =============

Net income (loss) per Unit                                  $        1.58    $        (2.08)       $        97.03    $       (6.59)
                                                            =============    ==============        ==============    =============













                             The Notes to Financial  Statements  are an integral part of these statements.

                                                                 3
</TABLE>
<PAGE>


<TABLE>
<CAPTION>
          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (A CONNECTICUT LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS

              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
                                   (Unaudited)

                                                                                         1996                      1995
                                                                                         ----                      ----
<S>                                                                               <C>                       <C> 
Cash flows from operating activities:
     Net income (loss)                                                            $     2,527,103           $      (165,357)
     Adjustment to reconcile net income (loss) to net cash
       provided by operating activities:
         Gain on sale of property                                                      (2,440,258)                       --
         Depreciation and amortization                                                    832,657                   996,285
         Accounts receivable                                                               (1,735)                   78,034
         Accounts payable and accrued expenses                                            (49,993)                   92,141
         Accrued interest payable                                                         (72,946)                      615
         Escrow deposits                                                                   69,348                  (133,839)
         Other, net                                                                       (28,919)                  142,438
                                                                                  ---------------           ---------------
              Net cash provided by operating activities                                   835,257                 1,010,317
                                                                                  ---------------           ---------------

Cash flows from investing activities:
     Purchase of property and improvements                                               (338,460)                 (165,048)
     Proceeds from sale of property                                                     7,853,900                        --
     Payment of closing costs related to sale of property                                (102,306)                       --
                                                                                  ---------------           ---------------
              Net cash provided by (used in) investing activities                       7,413,134                  (165,048)
                                                                                  ---------------           ---------------

Cash flows from financing activities:
     Proceeds from mortgage loan                                                               --                 5,300,000
     Repayment of notes and mortgage loans                                             (8,469,570)               (5,390,937)
     Payment of financing costs                                                                --                  (105,010)
     Cash distribution for limited partners                                                (6,990)                   (3,672)
                                                                                  ---------------           ---------------
              Net cash used in financing activities                                    (8,476,560)                 (199,619)
                                                                                  ---------------           ---------------

Net increase (decrease) in cash and cash equivalents                                     (228,169)                  645,650
Cash and cash equivalents, beginning of year                                            2,481,123                 1,662,708
                                                                                  ---------------           ---------------
Cash and cash equivalents, end of period                                          $     2,252,954           $     2,308,358
                                                                                  ===============           ===============

Supplemental disclosure of cash information:
     Interest paid during period                                                  $     1,439,016           $     1,663,493
                                                                                  ===============           ===============

Supplemental disclosure of non-cash information:
     Accrued purchases of property and improvements                               $            --           $         2,620
                                                                                  ===============           ===============






                             The Notes to Financial  Statements  are an integral part of these statements.

                                                                 4
</TABLE>
<PAGE>


            CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (A CONNECTICUT LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


     Readers of this quarterly report should refer to CONNECTICUT GENERAL REALTY
INVESTORS  III  LIMITED  PARTNERSHIP'S  (the  "Partnership")  audited  financial
statements  for the year  ended  December  31,  1995 which are  included  in the
Partnership's  1995 Annual Report,  as certain footnote  disclosures which would
substantially  duplicate  those contained in such audited  financial  statements
have been omitted from this report.

1.   BASIS OF ACCOUNTING

A)   BASIS OF PRESENTATION:  The accompanying financial statements were prepared
     in accordance with generally accepted  accounting  principles,  and reflect
     management's estimates and assumptions that affect the reported amounts. It
     is the  opinion  of  management  that the  financial  statements  presented
     reflect  all  the  adjustments  necessary  for a fair  presentation  of the
     financial condition and results of operations.

B)   RECENT  ACCOUNTING   PRONOUNCEMENT:   In  1995,  the  Financial  Accounting
     Standards Board issued Statement of Financial Accounting Standards No. 121,
     "Accounting  for the  Impairment  of Long-Lived  Assets and for  Long-Lived
     Assets to be  Disposed  of" (the  "Statement").  The  Statement  requires a
     writedown  to fair  value  when  long-lived  assets to be held and used are
     impaired.  Long-lived  assets to be disposed of, including real estate held
     for sale,  must be carried at the lower of cost or fair value less costs to
     sell.  In addition,  the  Statement  prohibits  depreciation  of long-lived
     assets to be disposed.  The Partnership  adopted the Statement in the first
     quarter of 1996. No  depreciation  was recorded in 1996 for Stewart's  Glen
     III which was sold on April 30, 1996.

C)   CASH AND CASH EQUIVALENTS:  Short term investments with a maturity of three
     months or less at the time of purchase are reported as cash equivalents.

2.   NOTES AND MORTGAGES PAYABLE

     In March 1996,  the mortgage note for Stewart's  Glen III was extended from
April 1, 1996 to May 1, 1996 with an option for an additional  extension to July
1, 1996 subject to certain conditions  including the execution of a purchase and
sale agreement, in order for the Partnership to complete a sale of the property.
On April 30, 1996, the Partnership  completed the sale of Stewart's Glen III and
retired the related mortgage note. The Partnership's  $3,400,000 promissory note
was paid in full on May 15, 1996.

3.   SALE OF INVESTMENT PROPERTY

     On April 30, 1996, the Partnership completed the sale of Stewart's Glen III
to AMLI  Residential  Properties,  L.P.  for a gross sales price of  $7,853,900.
After  closing  costs and payment of the first  mortgage  loan  obligation,  the
Partnership netted approximately $2,890,000. For book purposes, the property had
a carrying value of approximately $5,311,000 and the Partnership recorded a gain
of $2,440,258.  The Partnership  utilized the net proceeds from the sale and the
Partnership's  cash and cash equivalents to retire the Partnership's  $3,400,000
promissory note on May 15, 1996.








                                        5

<PAGE>


          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (A CONNECTICUT LIMITED PARTNERSHIP)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

4.   DEFERRED CHARGES

     Deferred charges consist of the following:

                                                                                     September 30,             December 31,
                                                                                         1996                      1995
     <S>                                                                          <C>                       <C> 
     Surety fee - Waterford Apartments mortgage note                              $       963,910           $       963,910
     Costs of obtaining financing                                                         765,532                   845,127
                                                                                  ---------------           ---------------
                                                                                        1,729,442                 1,809,037
     Accumulated amortization                                                            (548,161)                 (479,897)
                                                                                  ---------------           ----------------
                                                                                  $     1,181,281           $     1,329,140
                                                                                  ===============           ===============
</TABLE>

<TABLE>
<CAPTION>

5.   TRANSACTIONS WITH AFFILIATES

     The Partnership's promissory note payable was guaranteed by an affiliate of
the General Partner for an annual fee of 2% on the outstanding balance until the
note was retired on May 15, 1996.

     Other fees and expenses  related to the General  Partner or its  affiliates
are as follows:

                                                   Three Months Ended             Nine Months Ended             Unpaid at
                                                      September 30,                 September 30,             September 30,
                                                      -------------                 ------------              -------------
                                                 1996              1995          1996             1995             1996
                                                 ----              ----          ----             ----             ----
     <S>                                   <C>              <C>              <C>             <C>              <C>  
     Property management fee (a)           $      8,930     $      11,401    $    29,915     $     32,976     $      5,921
     Reimbursement (at cost) for
      out-of-pocket expenses                     13,415            19,479         43,148           42,483           37,278
                                           ------------     -------------    -----------     ------------     ------------
                                           $     22,345     $      30,880    $    73,063     $     75,459     $     43,199
                                           ============     =============    ===========     ============     ============

(a)  Does not include  on-site  property  management  fees earned by independent
     property  management  companies of $50,510 and $60,287 for the three months
     ended September 30, 1996 and 1995, respectively,  and $163,645 and $175,344
     for the nine  months  ended  September  30,  1996 and  1995,  respectively.
     On-site property  management  services have been contracted by an affiliate
     of the General  Partner on behalf of the  Partnership and are paid directly
     by the Partnership to the third party companies.
</TABLE>
6.   SUBSEQUENT EVENT

     The  Partnership  has declared a distribution of $1,565,928 or $63 per Unit
to the limited  partners  of record as of  November  30, 1996 and $10,071 to the
General Partner. The distribution will be paid on December 15, 1996.






                                        6

<PAGE>


      
          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (A CONNECTICUT LIMITED PARTNERSHIP)

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

     At September  30, 1996,  the  Partnership  had  $2,252,954 in cash and cash
equivalents  which  was  available  for  working  capital   requirements,   cash
distributions, and the Partnership's cash reserves.

     During the first quarter,  the Partnership  executed a letter of intent for
the sale of the Stewart's Glen Apartments to AMLI Residential,  L.P. To complete
the sale, the Partnership  arranged a short-term extension of the Stewart's Glen
mortgage maturity date. The Partnership completed the sale on April 30, 1996 for
a gross sales price of $7,853,900.  After closing costs and payment of the first
mortgage,  the Partnership netted  approximately  $2,890,000.  The property sale
generated a book gain of $2,440,258.

     On May 15,  1996,  the  Partnership  utilized  the net  proceeds  from  the
Stewart's Glen sale together with approximately  $510,000 from the Partnership's
cash  reserves to retire the  Partnership's  $3,400,000  Mellon Bank  promissory
note.

     The portfolio  generated  positive adjusted cash from operations after debt
service,  capital  improvements  and  partnership  expenses for the three months
ended  September  30,  1996  of  approximately   $172,000  and  year-to-date  of
approximately  $407,000. The Partnership's  properties have generated sufficient
net  operating  income to cover  debt  service,  partnership  expenses,  and the
substantial  increase  in capital  expenditures  year-to-date.  The  Partnership
expects  that cash from  operations  for the  remainder of the year will also be
sufficient to cover all necessary expenditures for partnership expenses, capital
expenditures, debt service, and a distribution to partners.

     As a result of the sale of the  Stewart's  Glen property and the payment of
the  Partnership's  promissory  note,  the  Partnership  is now in a position to
reduce  cash  reserves  to a level  deemed  sufficient  in  connection  with the
Partnership's  operations.  The  Partnership  will make a cash  distribution  of
$1,565,928  or $63 per Unit to limited  partners  of record as of  November  30,
1996. The distribution  will be paid on December 15, 1996. The distribution will
comprise  a  reduction  to cash  reserves  and  cumulative  adjusted  cash  from
operations.  To the extent cash is available from operations  each quarter,  the
Partnership will resume regular quarterly distributions in 1997.

RESULTS OF OPERATIONS

     Generally, decreases in operating income and expenses are the result of the
sale of Stewart's Glen III on April 30, 1996. The following  analytical comments
have been limited to the Partnership's three remaining properties.

     Overall, higher average occupancy and an increase in rental rates led to an
increase in rental  income of  approximately  $29,000  for the three  months and
$124,000 for the nine months ended September 30, 1996, as compared with the same
periods of 1995.

     Other  income  decreased  $13,000 and $43,000 for the three and nine months
ended  September  30, 1996,  respectively,  as compared with the same periods of
1995. In 1995, the Partnership  received its share of percentage rent and tenant
expense recapture  receivables  relating to Promenades Plaza. At the time of the
property sale in 1994,  the  Partnership  set up a receivable  for amounts to be
received  outside the closing.  The  Partnership  received a total of $39,344 in
excess of the amount recorded as a receivable.


                                        7

<PAGE>


          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (A CONNECTICUT LIMITED PARTNERSHIP)

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




     Interest  income  decreased for the three months and increased for the nine
months ended  September  30, 1996,  as compared with the same periods of 1995. A
lower  interest  rate on short term  investments  led to a decrease  in interest
income for the three months,  while a higher  average cash balance  (essentially
the Stewart's  Glen III sales  proceeds from April 30, 1996 to May 15, 1996 when
the proceeds  were utilized to retire,  in part,  the  Partnership's  $3,400,000
promissory note) led to an increase in interest income for the nine months.

     Property operating expenses increased $39,000 and $76,000 for the three and
nine months ended  September 30, 1996,  respectively,  as compared with the same
periods of 1995. For the three-month period, maintenance and repair increased at
Versailles Village because of repairs on a number of HVAC units and a main water
line  break,  and at  Stonebridge  because of  exterior  painting  completed  in
conjunction with the roof repair project and an increase in the number of carpet
replacements.  In addition to the three month increases,  maintenance and repair
expense increased for the nine-month period at Stonebridge due to a pest control
treatment  and at  Waterford as a result of an increase in the cost of preparing
apartments for rent upon a tenant move out,  including the additional expense of
replacing  wallpaper in units. The increase at Waterford was partially offset by
a decrease in  landscaping  expense.  Utilities  increased at Versailles for the
three and nine-month periods and at Waterford for the nine-month period due to a
harsh  winter  as  well  as  rate  increases.   For  the  nine-month  period  at
Stonebridge,  fewer  corporate  apartment  rentals led to an increase in utility
expense. Insurance costs were higher for Stonebridge for the nine-month period.

     General and  administrative  expenses  were  relatively  flat for the three
months and  decreased  $9,000 for the nine  months  ended  September  30,  1996,
respectively,  as compared with the same periods of 1995.  Advertising costs for
Waterford  and  Stonebridge  dropped  as a result  of  improved  occupancy,  and
increased at Versailles in an effort to increase  occupancy.  A net reduction in
the  provision for doubtful  accounts at Waterford and a decline in  Partnership
legal  expenses  also  contributed  to the  decrease  for the nine months  ended
September  30,  1996.  As a partial  offset to the  expense  decreases,  payroll
expenses at Stonebridge  went up primarily due to the hiring of new  maintenance
employees.

     Fees and reimbursements to affiliates  decreased for the three months ended
September 30, 1996, as compared with the same period of 1995,  due to a decrease
in management fees from the sale of Stewart's Glen III on April 30, 1996 coupled
with timing of reimbursable expenses.

     The decrease in interest  expense of $78,000 and $122,000 for the three and
nine months ended September 30, 1996,  respectively,  as compared with 1995, was
primarily the result of the retirement of the $3,400,000  Mellon Bank promissory
note on May 15, 1996.

     Depreciation  and  amortization  increased $3,000 and $15,000 for the three
and nine months ended  September  30, 1996,  respectively,  as compared with the
previous  year.  The increase was  primarily  the result of  amortization  costs
related to the April 1, 1995 refinancing of Stonebridge Manor's first mortgage.











                                        8

<PAGE>


          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (A CONNECTICUT LIMITED PARTNERSHIP)

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




<TABLE>
<CAPTION>
                                    OCCUPANCY

     The  following is a listing of  approximate  physical  occupancy  levels by
quarter for the Partnership's investment properties:

                                                                   1995                                          1996
                                          -------------------------------------------------      ----------------------------------
<S>                                         <C>          <C>          <C>         <C>             <C>           <C>         <C> 
                                            At 3/31      At 6/30      At 9/30     At 12/31        At 3/31       At 6/30     At 9/30

1.   Versailles Village Apartments
     Forest Park, Ohio                        97%          99%          96%          94%             97%          98%          96%

2.   Waterford Apartments
     Tulsa, Oklahoma                          90%          96%          98%          92%             94%          94%          93%

3.   Stonebridge Manor Apartments
     New Orleans, Louisiana                   96%          97%          96%          98%             97%          97%          95%

4.   Stewart's Glen Apts. Phase III
     Willowbrook, Illinois (a)                96%          89%          98%          97%             89%          N/A          N/A

An N/A indicates  that the property was not owned by the  partnership at the end
of the quarter.

     (a) Stewart's Glen III was sold April 30, 1996.
</TABLE>

PART II- OTHER INFORMATION

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits:

         27 Financial Data Schedules.

     (b) No Form 8-Ks were filed  during the three months  ended  September  30,
1996.


                                        9

<PAGE>



                                   SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                 CONNECTICUT GENERAL REALTY INVESTORS III
                                 LIMITED PARTNERSHIP


                                 By:      CIGNA Realty Resources, Inc. - Fifth,
                                          General Partner




Date: November 14, 1996          By:      /s/ John D. Carey
      ------------------                  -----------------
                                          John D. Carey, President
                                          (Principal Executive Officer)



Date: November 14, 1996          By:      /s/ Josephine C. Donofrio
      -----------------                   -------------------------
                                          Josephine C. Donofrio, Controller
                                          (Principal Accounting Officer)


                                       10

<PAGE>