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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, 1998

                                       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>



Part I - Financial Information

<TABLE>
          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (a Connecticut limited partnership)

                                 Balance Sheets
<CAPTION>
                                                                                       September 30,               December 31,
                                                                                           1998                        1997
                                                               Assets                   (Unaudited)                  (Audited)

<S>                                                                                  <C>                          <C>           
Property and improvements, at cost:
     Land and land improvements                                                      $    3,003,903               $    2,964,303
     Buildings                                                                           16,656,620                   16,618,817
     Furniture and fixtures                                                               1,437,605                    1,390,985
                                                                                     --------------               --------------
                                                                                         21,098,128                   20,974,105
     Less accumulated depreciation                                                        8,585,771                    8,112,558
                                                                                     --------------               --------------
              Net property and improvements                                              12,512,357                   12,861,547

Cash and cash equivalents                                                                   656,213                      682,614
Accounts receivable (net of allowance of $8,037
   in 1998 and $12,907 in 1997)                                                               6,992                        9,819
Escrow deposits                                                                             148,306                      144,407
Other asset                                                                                   1,000                        1,000
Deferred charges, net                                                                       803,957                      926,086
Escrowed debt service funds                                                                 506,660                      506,660
                                                                                     --------------               --------------
              Total                                                                  $   14,635,485               $   15,132,133
                                                                                     ==============               ==============

                        Liabilities and Partners' Deficit

Liabilities:
     Notes and mortgages payable                                                     $   15,292,412               $   15,452,462
     Accounts payable and accrued expenses (including $43,135
       in 1998 and $20,550 in 1997 due to affiliates)                                       230,222                      235,092
     Tenant security deposits                                                                72,852                       61,350
     Unearned income                                                                         16,526                       13,011
                                                                                     --------------               --------------
              Total liabilities                                                          15,612,012                   15,761,915
                                                                                     --------------               --------------

Partners' deficit:
     General Partner:
         Capital contributions                                                                1,000                        1,000
         Cumulative net income                                                               26,349                       25,802
         Cumulative cash distributions                                                      (32,508)                     (28,494)
                                                                                     --------------               --------------
                                                                                             (5,159)                      (1,692)
                                                                                     --------------               --------------
     Limited partners (24,856 Units)
         Capital contributions, net of offering costs                                    22,408,052                   22,408,052
         Cumulative net loss                                                            (15,065,959)                 (15,120,129)
         Cumulative cash distributions                                                   (8,313,461)                  (7,916,013)
                                                                                     --------------               --------------
                                                                                           (971,368)                    (628,090)
                                                                                     --------------               --------------
              Total partners' deficit                                                      (976,527)                    (629,782)
                                                                                     --------------               --------------
              Total                                                                  $   14,635,485               $   15,132,133
                                                                                     ==============               ==============




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

</TABLE>

                                        2

<PAGE>


<TABLE>

          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (a Connecticut limited partnership)

                            Statements of Operations
                                   (Unaudited)
<CAPTION>

                                                                           Three Months Ended                 Nine Months Ended
                                                                              September 30,                     September 30,
                                                                              -------------                     -------------
                                                                        1998               1997            1998             1997
                                                                        ----               ----            ----             ----

<S>                                                               <C>               <C>              <C>              <C>          
Income:
     Rental income                                                $      816,488    $   1,208,227    $    2,410,696   $   3,559,350
     Other income                                                         18,645           34,632            49,052          88,560
     Interest income                                                      15,172           18,130            50,908          52,461
                                                                  --------------    -------------    --------------   -------------
                                                                         850,305        1,260,989         2,510,656       3,700,371
                                                                  --------------    -------------    --------------   -------------

Expenses:
     Property operating expenses                                         263,255          354,051           718,646       1,002,438
     General and administrative                                          115,156          168,248           357,676         519,894
     Fees and reimbursements to affiliates                                31,750           37,227            87,264         118,243
     Interest expense                                                    231,411          366,885           697,011       1,100,972
     Depreciation and amortization                                       203,377          194,768           595,342         757,269
                                                                  --------------    -------------    --------------   -------------
                                                                         844,949        1,121,179         2,455,939       3,498,816
                                                                  --------------    -------------    --------------   -------------

         Net income                                               $        5,356    $     139,810    $       54,717   $     201,555
                                                                  ==============    =============    ==============   =============

Net income:
     General Partner                                              $           53    $       1,399    $          547   $       2,016
     Limited partners                                                      5,303          138,411            54,170         199,539
                                                                  --------------    -------------    --------------   -------------
                                                                  $        5,356    $     139,810    $       54,717   $     201,555
                                                                  ==============    =============    ==============   =============

Net income per Unit                                               $         0.21    $        5.57    $         2.18   $        8.03
                                                                  ==============    =============    ==============   =============

Cash distribution per Unit                                        $         5.04    $        6.75    $        15.99   $       13.20
                                                                  ==============    =============    ==============   =============


















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

</TABLE>

                                        3

<PAGE>


<TABLE>

          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (a Connecticut limited partnership)

                            Statements of Cash Flows

              For the Nine Months Ended September 30, 1998 and 1997
                                   (Unaudited)
<CAPTION>

                                                                                         1998                      1997
                                                                                         ----                      ----


<S>                                                                               <C>                       <C>            
Cash flows from operating activities:
     Net income                                                                   $        54,717           $       201,555
     Adjustment to reconcile net income to net cash
       provided by operating activities:
         Depreciation and amortization                                                    595,342                   757,269
         Accounts receivable                                                                2,827                       816
         Accounts payable and accrued expenses                                             (4,870)                  115,206
         Escrow deposits                                                                   (3,899)                  (66,084)
         Other, net                                                                        15,017                   (20,124)
                                                                                  ---------------           ---------------
              Net cash provided by operating activities                                   659,134                   988,638
                                                                                  ---------------           ---------------

Cash flows from investing activities:
     Purchase of property and improvements                                               (124,023)                 (227,196)
                                                                                  ---------------           ---------------

Cash flows from financing activities:
     Distribution to limited partners                                                    (397,448)                 (328,099)
     Distribution to General Partner                                                       (4,014)                   (3,313)
     Repayment of notes and mortgage loans                                               (160,050)                 (244,047)
                                                                                  ---------------           ---------------
              Net cash used in financing activities                                      (561,512)                 (575,459)
                                                                                  ---------------           ---------------

Net increase (decrease) in cash and cash equivalents                                      (26,401)                  185,983
Cash and cash equivalents, beginning of year                                              682,614                   638,965
                                                                                  ---------------           ---------------
Cash and cash equivalents, end of period                                          $       656,213           $       824,948
                                                                                  ===============           ===============

Supplemental disclosure of cash information:
     Interest paid during period                                                  $       697,011           $     1,100,972
                                                                                  ===============           ===============















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

</TABLE>
                                        4

<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,  1997 which are  included  in the
Partnership's  1997 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.

b)   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.   Deferred Charges

     Deferred charges consist of the following:
<TABLE>
<CAPTION>

                                                                                     September 30,             December 31,
                                                                                         1998                      1997

<S>                                                                               <C>                       <C>            
     Surety fee - Waterford Apartments mortgage note                              $       963,910           $       963,910
     Costs of obtaining financing                                                         660,522                   660,522
                                                                                  ---------------           ---------------
                                                                                        1,624,432                 1,624,432
     Accumulated amortization                                                            (820,475)                 (698,346)
                                                                                  ---------------           ---------------
                                                                                  $       803,957           $       926,086
                                                                                  ===============           ===============
</TABLE>

3.   Transactions with Affiliates

     Fees and expenses  related to the General  Partner or its affiliates are as
follows:
<TABLE>
<CAPTION>

                                                   Three Months Ended             Nine Months Ended              Unpaid at
                                                      September 30,                 September 30,              September 30,
                                                      -------------                 -------------              -------------
                                                 1998              1997         1998             1997              1998
                                                 ----              ----         ----             ----              ----

<S>                                        <C>              <C>              <C>             <C>              <C>        
     Property management fees (a)          $      5,235     $       9,362    $    15,264     $    27,403      $     3,482
     Partnership management fees                 12,291            15,795         37,842          48,556           12,291
     Reimbursement (at cost) for
      out-of-pocket expenses                     14,224            12,070         34,158          42,284           27,362
                                           ------------     -------------    -----------     -----------      -----------
                                           $     31,750     $      37,227    $    87,264     $   118,243      $    43,135
                                           ============     =============    ===========     ===========      ===========
</TABLE>


                                        5

<PAGE>



          CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
                       (a Connecticut limited partnership)

                    Notes to Financial Statements (Continued)
                                   (Unaudited)



(a)  Does not include  on-site  property  management  fees earned by independent
     property  management  companies of $36,150 and $52,432 for the three months
     ended September 30, 1998 and 1997, respectively,  and $106,853 and $153,976
     for the nine  months  ended  September  30,  1998 and  1997,  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.

4.   Subsequent Event

     On November 15, 1998, the  Partnership  paid a distribution  of $123,037 to
the limited partners and $1,243 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

     Except for historical information provided in this Management's  Discussion
and Analysis,  statements made in this document are  forward-looking and contain
information about financial  results,  economic  conditions,  trends,  and known
uncertainties.  The  Partnership  cautions the reader that actual  results could
differ materially from those expected by the Partnership.

Liquidity and Capital Resources

     At  September  30,  1998,  the  Partnership  had  $656,213 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,  1998,  the  Partnership  generated  $124,000  and
$384,000,  respectively,  of adjusted cash from  operations  after debt service,
capital  improvements,  and  adjustments  to the  Partnership's  cash  reserves.
Year-to-date   operations  are  in  line  with  the  1998  operating  plan.  The
Partnership  expects  capital  expenditures to be 11% below those planned at the
start of the year. The Partnership  paid the first quarter 1998  distribution of
$130,494 or $5.25 per Unit on May 15, 1998 and the Partnership's  second quarter
1998 cash  distribution  of $125,274 or $5.04 per Unit on August 15,  1998.  The
Partnership  will pay the third  quarter  distribution  of $123,037 or $4.95 per
Unit on November 15, 1998. The distributions  represent the respective quarter's
adjusted  cash  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,
until the sale of the  Partnership's  remaining two properties.  The Partnership
plans to market Waterford  Apartments for sale in the fourth quarter of 1998 and
Versailles  Village in the first quarter of 1999.  Current plans assume the sale
of the  apartment  projects  in the  first  half of 1999.  Once the  Partnership
completes  the  sales of the two  remaining  properties,  the  Partnership  will
distribute the net sales proceeds to the limited  partners as part of a complete
liquidation and Partnership termination.

Results of Operations

     Decreases  were  reflected  in the  statement  of  operations,  except  for
depreciation  and amortization for the three months ended September 30, 1998, as
the result of the sale of  Stonebridge  Manor  Apartments  in October  1997.  In
accordance  with SFAS No. 121,  assets held for sale are no longer  depreciated,
and therefore, because Stonebridge Manor Apartments was held for sale as of July
1997,  depreciation  was not recorded for the three months ended  September  30,
1997.

     The Partnership's results reflect the following changes relative to the two
remaining properties. At Waterford Apartments,  rental income increased 6.3% for
the three and nine months ended  September  30, 1998,  as compared with the same
periods in 1997, due to an increase in rental rates.  An increase in water usage
and higher payroll costs  partially  offset the increase in revenue,  netting an
increase in property  net  operating  income of 4% for the three months and 7.5%
for the nine months ended  September  30, 1998. At  Versailles  Village,  strong
occupancy in the first and second  quarters of 1998 and an increase in rates led
to higher rental revenue for the nine months ended  September 30, 1998. A slight
decrease in  occupancy  offset the  increase in rates  resulting  in flat rental
revenue at Versailles Village for the third quarter.  Property operating expense
increased at  Versailles  Village for the three and nine months ended  September
30,  1998,  as  compared  with the same  periods in 1997,  due to an increase in
carpet,  paint and cleaning  expense.  In addition,  payroll costs  (general and
administrative  expense)  were  higher at  Versailles  Village due to a staffing
vacancy in 1997. As a result of net revenue and expense increases,  property net
operating  income  decreased  3% for the three months and 1% for the nine months
ended  September  30,  1998,  as  compared  with  the  same  periods  in 1997 at
Versailles Village.

     Fees and  reimbursements  to affiliates  decreased because of a drop in the
property management fees (resulting from the sale of Stonebridge  Manor),  lower
partnership  management fees as a result of less cash available for distribution
(resulting  from  the  sale of  Stonebridge  Manor),  and a  savings  in 1998 on
printing costs.

                                        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)




                                    Occupancy

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

                                                                1997                                             1998              
                                          -------------------------------------------------          ------------------------------
                                            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                        94%          96%          98%          94%                   97%      100%       94%

2.   Waterford Apartments
     Tulsa, Oklahoma                          94%          95%          96%          92%                   94%       97%       94%

3.   Stonebridge Manor Apartments
     New Orleans, Louisiana (a)               97%          97%          96%          N/A                   N/A       N/A       N/A

</TABLE>

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

     (a) Stonebridge Manor Apartments was sold October 23, 1997.

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 30,1998.


                                        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 13, 1998          By:      /s/ John D. Carey                  
      ------------------                  --------------------------------------
                                          John D. Carey, President
                                          (Principal Executive Officer)



Date: November 13, 1998          By:      /s/ Josephine C. Donofrio         
      -----------------                   --------------------------------------
                                          Josephine C. Donofrio, Controller
                                          (Principal Accounting Officer)


                                        9

<PAGE>