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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, 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 0-14466

          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,
                                                                                           1997                        1996
                                                               ASSETS                   (UNAUDITED)                  (AUDITED)
<S>                                                                                  <C>                          <C>   
Property and improvements, at cost:
     Land and land improvements                                                      $    4,219,576               $    4,170,151
     Buildings                                                                           25,607,909                   25,569,468
     Furniture and fixtures                                                               2,145,748                    2,071,051
                                                                                     --------------               --------------
                                                                                         31,973,233                   31,810,670
     Less accumulated depreciation                                                       12,049,475                   11,431,301
                                                                                     --------------               --------------
              Net property and improvements                                              19,923,758                   20,379,369

Cash and cash equivalents                                                                   824,948                      638,965
Accounts receivable (net of allowance of $8,696
   in 1997 and $6,497 in 1996)                                                               10,242                       11,058
Escrow deposits                                                                             241,382                      175,298
Other asset                                                                                   1,000                        1,000
Deferred charges, net                                                                       992,900                    1,131,995
Escrowed debt service funds                                                                 506,660                      506,660
                                                                                     --------------               --------------
              Total                                                                  $   22,500,890               $   22,844,345
                                                                                     ==============               ==============

                   LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

Liabilities:
     Notes and mortgages payable                                                     $   20,563,572               $   20,807,619
     Accounts payable and accrued expenses (including $50,450
       in 1997 and $5,978 in 1996 due to affiliates)                                        295,667                      245,094
     Tenant security deposits                                                               145,790                      151,867
     Unearned income                                                                         15,577                       29,624
                                                                                     --------------               --------------
              Total liabilities                                                          21,020,606                   21,234,204
                                                                                     --------------               --------------

Partners' capital (deficit):
     General Partner:
         Capital contributions                                                                1,000                        1,000
         Cumulative net income                                                               13,534                       11,518
         Cumulative cash distributions                                                      (26,739)                     (23,426)
                                                                                     --------------               --------------
                                                                                            (12,205)                     (10,908)
                                                                                     --------------               --------------
     Limited partners (24,856 Units):
         Capital contributions, net of offering costs                                    22,408,052                   22,408,052
         Cumulative net loss                                                            (17,688,386)                 (17,887,925)
         Cumulative cash distributions                                                   (3,227,177)                  (2,899,078)
                                                                                     --------------               --------------
                                                                                          1,492,489                    1,621,049
                                                                                     --------------               --------------
              Total partners' capital                                                     1,480,284                    1,610,141
                                                                                     --------------               --------------
              Total                                                                  $   22,500,890               $   22,844,345
                                                                                     ==============               ==============


                             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,
                                                                              -------------                     -------------
                                                                        1997               1996            1997             1996
                                                                        ----               ----            ----             ----
<S>                                                               <C>               <C>              <C>              <C>      
Income:
     Rental income                                                $    1,208,227    $   1,168,116    $    3,559,350   $   3,782,365
     Other income                                                         34,632           27,372            88,560         100,738
     Interest income                                                      18,130           32,627            52,461         114,651
                                                                  --------------    -------------    --------------   -------------
                                                                       1,260,989        1,228,115         3,700,371       3,997,754
                                                                  --------------    -------------    --------------   -------------


Expenses:
     Property operating expenses                                         354,051          348,928         1,002,438       1,095,887
     General and administrative                                          168,248          166,174           519,894         543,232
     Fees and reimbursements to affiliates                                37,227           22,345           118,243          73,063
     Interest expense (includes $-0- and $25,500
      in 1996 to affiliates)                                             366,885          372,609         1,100,972       1,366,070
     Depreciation and amortization                                       194,768          278,435           757,269         832,657
                                                                  --------------    -------------    --------------   -------------
                                                                       1,121,179        1,188,491         3,498,816       3,910,909
                                                                  --------------    -------------    --------------   -------------

         Net income from operations                                      139,810           39,624           201,555          86,845


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

         Net income                                               $      139,810    $      39,624    $      201,555   $   2,527,103
                                                                  ==============    =============    ==============   =============

Net income:
     General Partner                                              $        1,399    $         396    $        2,016   $     115,311
     Limited partners                                                    138,411           39,228           199,539       2,411,792
                                                                  --------------    -------------    --------------   -------------
                                                                  $      139,810    $      39,624    $      201,555   $   2,527,103
                                                                  ==============    =============    ==============   =============

Net income per Unit                                               $         5.57    $        1.58    $         8.03   $       97.03
                                                                  ==============    =============    ==============   =============

Cash distribution per Unit                                        $         6.75    $          --    $        13.20   $          --
                                                                  ==============    =============    ==============   =============











                             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, 1997 AND 1996
                                   (Unaudited)

                                                                                         1997                      1996
                                                                                         ----                      ----
<S>                                                                               <C>                       <C>      
Cash flows from operating activities:
     Net income                                                                   $       201,555           $     2,527,103
     Adjustment to reconcile net income to net cash
       provided by operating activities:
         Gain on sale of property                                                              --                (2,440,258)
         Depreciation and amortization                                                    757,269                   832,657
         Accounts receivable                                                                  816                    (1,735)
         Accounts payable and accrued expenses                                            115,206                   (49,993)
         Accrued interest payable                                                              --                   (72,946)
         Escrow deposits                                                                  (66,084)                   69,348
         Other, net                                                                       (20,124)                  (28,919)
                                                                                  ----------------          ----------------
              Net cash provided by operating activities                                   988,638                   835,257
                                                                                  ---------------           ---------------

Cash flows from investing activities:
     Purchase of property and improvements                                               (227,196)                 (338,460)
     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                        (227,196)                7,413,134
                                                                                  ----------------          ---------------


Cash flows from financing activities:
     Repayment of notes and mortgage loans                                               (244,047)               (8,469,570)
     Cash distribution to limited partners                                               (328,099)                   (6,990)
     Cash distribution to General Partner                                                  (3,313)                       --
                                                                                  ----------------          ---------------
              Net cash used in financing activities                                      (575,459)               (8,476,560)
                                                                                  ----------------          ----------------

Net increase (decrease) in cash and cash equivalents                                      185,983                  (228,169)
Cash and cash equivalents, beginning of year                                              638,965                 2,481,123
                                                                                  ---------------           ---------------
Cash and cash equivalents, end of period                                          $       824,948           $     2,252,954
                                                                                  ===============           ===============

Supplemental disclosure of cash information:
     Interest paid during period                                                  $     1,100,972           $     1,439,016
                                                                                  ===============           ===============









                             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,  1996 which are  included  in the
Partnership's  1996 Annual Report,  as certain footnote  disclosures which would
substantially  duplicate  those contained in such audited  financial  statements
have been omitted from this report.

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A)   BASIS OF  PRESENTATION:  The  financial  statements  have been  prepared in
     conformity  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.  All such adjustments are of
     a normal recurring nature. Certain amounts in the 1996 financial statements
     have been reclassified to conform to the 1997 presentation.

B)   PROPERTY AND  IMPROVEMENTS:  Property and  improvements are either held for
     the production of income or held for sale.  Property and improvements  held
     for the  production  of income  are  carried at  depreciated  cost less any
     write-downs to fair value.  The cost represents the initial  purchase price
     and  subsequent  capitalized  costs  and  adjustments,   including  certain
     acquisition  expenses.  Depreciation  is  calculated  on the  straight-line
     method based on the estimated useful lives of the various  components (5 to
     30 years).

     Properties are considered  held for sale when they are subject to an active
     plan to find a buyer and a sale is likely to be completed  within one year.
     Effective with the implementation of SFAS No. 121, properties held for sale
     are carried at the lower of cost or fair value less estimated costs to sell
     (through the use of valuation reserves).  Properties that are held for sale
     are no longer  depreciated.  As of July 1997,  Stonebridge Manor Apartments
     was  held  for  sale.  Net  income  from  operations  for the held for sale
     property was $145,054  for the three and nine months  ended  September  30,
     1997.

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.
<TABLE>
<CAPTION>
2.   DEFERRED CHARGES

     Deferred charges consist of the following:

                                                                                     September 30,             December 31,
                                                                                         1997                      1996
     <S>                                                                          <C>                       <C>
     Surety fee - Waterford Apartments mortgage note                              $       963,910           $       963,910
     Costs of obtaining financing                                                         765,532                   765,532
                                                                                  ---------------           ---------------
                                                                                        1,729,442                 1,729,442
     Accumulated amortization                                                            (736,542)                 (597,447)
                                                                                  ---------------           ---------------
                                                                                  $       992,900           $     1,131,995
                                                                                  ===============           ===============



                                                                 5
</TABLE>
<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (Unaudited)

<TABLE>
<CAPTION>
3.   TRANSACTIONS WITH AFFILIATES

     An affiliate of the General Partner guaranteed the Partnership's promissory
note  payable  for an  annual  fee of 2% on the  outstanding  balance  until the
Partnership retired the note 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,
                                                      -------------                 -------------              -------------
                                                 1997              1996         1997             1996              1997
                                                 ----              ----         ----             ----              ----
     <S>                                   <C>              <C>              <C>             <C>              <C>         
     Property management fees (a)          $      9,362     $       8,930    $    27,403     $    29,915      $     6,360
     Partnership management fees                 15,795                --         48,556              --           18,718
     Reimbursement (at cost) for
      out-of-pocket expenses                     12,070            13,415         42,284          43,148           25,372
                                           ------------     -------------    -----------     -----------      -----------
                                           $     37,227     $      22,345    $   118,243     $    73,063      $    50,450
                                           ============     =============    ===========     ===========      ===========


(a)  Does not include  on-site  property  management  fees earned by independent
     property  management  companies of $52,432 and $50,510 for the three months
     ended September 30, 1997 and 1996, respectively,  and $153,976 and $163,645
     for the nine months ended  September  30, 1997 and 1996,  respectively.  An
     affiliate of the General Partner has contracted on-site property management
     services  on  behalf  of the  Partnership  and  are  paid  directly  by the
     Partnership to the third party companies.
</TABLE>
4.   SUBSEQUENT EVENT

     On October 23, 1997,  the  Partnership  completed  the sale of  Stonebridge
Manor Apartments to TGM Realty Corp. #6, a Delaware corporation, for an all cash
gross  sales  price  of  $9,800,000.  The  property  had a  depreciated  cost of
approximately  $7,000,000 as of the date of sale. After deducting closing costs,
the Partnership expects to record a gain of approximately $2,600,000.

     On November 15, 1997, the  Partnership  was scheduled to pay a distribution
of $4,688,836 to the limited partners and $1,755 to the General Partner.












                                                                 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,  1997,  the  Partnership  had  $824,948 in cash and cash
equivalents  which  was  available  for  working  capital   requirements,   cash
distributions, and the Partnership's cash reserves.

     For the three and nine months ended  September  30, 1997,  the  Partnership
generated  $191,000 and $555,000,  respectively,  of cash from operations  after
debt service,  capital  improvements,  and adjustments to the Partnership's cash
reserves,  "adjusted cash from operations."  Overall third quarter cash flow for
the three  remaining  properties,  the Stewart's Glen property was sold in April
1996,  was  consistent  with  the  first  two  quarters  of  1997.  Year-to-date
operations  are in line with the 1997 operating  plan.  Beginning with the first
quarter  of  1997,  the  Partnership  resumed  the  payment  of  quarterly  cash
distributions  from  operations.   The  Partnership  plans  to  distribute  cash
quarterly to the extent cash is available  from  operations  after debt service,
capital, and changes to cash reserves for liabilities and capital  expenditures.
The  Partnership  paid the first quarter 1997 cash  distribution  of $160,321 or
$6.45 per Unit on May 15, 1997 and the second quarter 1997 cash  distribution of
$167,778 or $6.75 per Unit on August 15,  1997,  representative  of the adjusted
cash  from  operations  for  each  quarter.  The  Partnership  will  pay a  cash
distribution of $4,688,836 or $188.64 per Unit on November 15, 1997 representing
the third quarter's  adjusted cash from operations of $6.99 per Unit and the net
proceeds  from the sale of  Stonebridge  Manor  Apartments  of $181.65 per Unit.
Distributable  cash  generated  from  operations  may decline in future  periods
because of the sale of the Stonebridge Manor property.

     Following  the strategy  developed  for the sale of the  Stonebridge  Manor
Apartments,  the Partnership  began marketing the property for sale in July. The
property's results have steadily improved since 1990 and the market in which the
property operates has slowly improved.  The property has achieved the top rental
rates and occupancy  among its  competition  in the local  market,  although the
rental  rate  increases  have  slowed  over the past two  years.  Economic  data
indicates that the market is expected to have continued but slow growth over the
near term. Although interest in real estate investments has been strong over the
past couple of years,  very few  transactions  have  occurred in the New Orleans
market. The Partnership  considered many factors in deciding to proceed with the
sale  including  the  impending  debt  maturity of April 1, 1998,  the growth in
operating  results  over the past few years,  and the  interest  in real  estate
investments,  and the Partnership's short term outlook. On October 23, 1997, the
Partnership  sold  Stonebridge to TGM Realty Corp. #6 for a gross sales price of
$9,800,000. The property was purchased on November 26, 1985 for a total purchase
price of  $10,409,845,  including  acquisition  fees and  closing  costs.  After
deducting  closing  costs and  retirement  of the debt balance of  approximately
$5,075,000,  the Partnership netted approximately $4,500,000. The property had a
depreciated  cost of  approximately  $7,000,000  as of the date of  sale.  After
deducting   closing  costs,  the  Partnership   expects  to  record  a  gain  of
approximately  $2,600,000.  The  Partnership  is scheduled to distribute the net
proceeds from the sale to limited partners on November 15, 1997.

RESULTS OF OPERATIONS

     Generally,  decreases  in the income  statement  accounts for the three and
nine months ended September 30, 1997, as compared with the same periods in 1996,
are the result of the sale of Stewart's Glen Apartments in April 1996.  Interest
income  decreased due to a lower average cash balance.  The average cash balance
for the second  quarter of 1996 included the proceeds from the sale of Stewart's
Glen  Apartments.  The  proceeds  from the sale  were  utilized  to  payoff  the
Partnership's  unsecured debt on May 15, 1996.  Further,  a cash distribution to
partners in December 1996 reduced the cash balance.  Interest expense decreased
due to the  retirement of the Stewart's Glen mortgage note upon sale of the 
property in April 1996, and the retirement of the $3,400,000  Mellon Bank
promissory note on May 15, 1996.



                                                                 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)


     Fees and reimbursements to affiliates  increased as a result of partnership
management  fees earned by an affiliate in connection  with the  quarterly  1997
cash distributions.  The Partnership did not distribute cash from operations for
the first three quarters of 1996. In accordance  with SFAS No. 121,  assets held
for sale are no  longer  depreciated,  and  therefore,  because Stonebridge was
held for sale as of July 1997, depreciation and amortization decreased for the
three and nine months  ended  September  30,  1997,  as  compared  with the same
periods in 1996.

<TABLE>
<CAPTION>
                                    OCCUPANCY

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

                                                                1996                                               1997
                                          -------------------------------------------------                  ------------------
                                            At 3/31      At 6/30      At 9/30     At 12/31              At 3/31   At 6/30   At 9/30
                                            -------      -------      -------     --------              -------   -------   -------
<S>                                         <C>          <C>          <C>         <C>                   <C>       <C>       <C>   
1.   Versailles Village Apartments
     Forest Park, Ohio                        97%          98%          96%          94%                   94%       96%       98%

2.   Waterford Apartments
     Tulsa, Oklahoma                          94%          94%          93%          89%                   94%       95%       96%

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

4.   Stewart's Glen Apts. Phase III
     Willowbrook, Illinois (a)                89%          N/A          N/A          N/A                   N/A       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,
1997.


                                                                 8

<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, 1997         By:      /s/ John D. Carey
      ------------------                 -----------------
                                         John D. Carey, President
                                         (Principal Executive Officer)



Date: November 14, 1997         By:      /s/ Josephine C. Donofrio
      -----------------                  -------------------------
                                         Josephine C. Donofrio, Controller
                                         (Principal Accounting Officer)


                                                                 9

<PAGE>