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, 1995
                               ------------------
                                      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 0-14348
                       -------

                   BALCOR EQUITY PENSION INVESTORS-III
                   A REAL ESTATE LIMITED PARTNERSHIP         
            -------------------------------------------------------
            (Exact name of registrant as specified in its charter)

          Illinois                                      36-3354308    
-------------------------------                     -------------------
(State or other jurisdiction of                      (I.R.S. Employer  
incorporation or organization)                      Identification No.)

2355 Waukegan Road
Bannockburn, Illinois                                     60015    
----------------------------------------            ------------------- 
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code (708) 267-1600
                                                   --------------
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     
    -----     -----
<PAGE>
                     BALCOR EQUITY PENSION INVESTORS-III
                      A REAL ESTATE LIMITED PARTNERSHIP
                      (An Illinois Limited Partnership)

                                BALANCE SHEETS
                  September 30, 1995 and December 31, 1994
                                 (Unaudited)

                                    ASSETS

                                                1995             1994
                                           --------------  ---------------
Cash and cash equivalents                  $  11,169,648   $    9,862,343
Accounts and accrued interest receivable       1,737,685        2,331,185
Prepaid expenses, principally real 
  estate taxes and insurance                     569,817          489,030
Deferred expenses, net of accumulated 
  amortization of $293,590 in 1995 and
  $238,795 in 1994                               222,701          277,496
                                           --------------  ---------------
                                              13,699,851       12,960,054
                                           --------------  ---------------
Investment in real estate:
  Land                                        14,394,281       14,394,281
  Buildings and improvements                  81,103,631       80,871,376
                                           --------------  ---------------
                                              95,497,912       95,265,657
  Less accumulated depreciation               28,488,112       26,259,390
                                           --------------  ---------------
Investment in real estate, net of 
  accumulated depreciation                    67,009,800       69,006,267
                                           --------------  ---------------
Investment in joint ventures with            
  affiliates                                  23,045,207       23,302,601
                                           --------------  ---------------
                                           $ 103,754,858   $  105,268,922
                                           ==============  ===============

                         LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                           $     225,296   $      587,400
Due to affiliates                                 30,560          102,973
Accrued liabilities, principally 
  real estate taxes                              456,598          514,034
Security deposits                                328,985          305,383
                                           --------------  ---------------
    Total liabilities                          1,041,439        1,509,790

Partners' capital (683,204 Limited
  Partnership Interests issued and           
  outstanding)                               102,713,419      103,759,132
                                           --------------  ---------------
                                           $ 103,754,858   $  105,268,922
                                           ==============  ===============

  The accompanying notes are an integral part of the financial statements.
<PAGE>
                     BALCOR EQUITY PENSION INVESTORS-III
                      A REAL ESTATE LIMITED PARTNERSHIP
                      (An Illinois Limited Partnership)

                      STATEMENTS OF INCOME AND EXPENSES
            for the nine months ended September 30, 1995 and 1994
                                 (Unaudited)

                                                1995             1994
                                           --------------   --------------
Income:
  Rental                                   $   9,667,032    $   9,471,533
  Service                                      1,967,152        1,997,001
  Participation in income of joint           
    ventures with affiliates                   1,354,407        1,195,507
  Interest on short-term investments             463,076          269,911
                                           --------------   --------------
      Total income                            13,451,667       12,933,952
                                           --------------   --------------
Expenses:
  Depreciation                                 2,228,722        2,246,453
  Amortization of deferred expenses               54,795           54,359
  Property operating                           3,739,739        4,008,234
  Real estate taxes                            1,250,734        1,290,806
  Property management fees                       535,653          519,991
  Administrative                                 588,985          506,319
                                           --------------   --------------
      Total expenses                           8,398,628        8,626,162
                                           --------------   --------------
Net income                                 $   5,053,039    $   4,307,790
                                           ==============   ==============
Net income allocated to General Partner    $     747,198    $     673,373
                                           ==============   ==============
Net income allocated to Limited Partners   $   4,305,841    $   3,634,417
                                           ==============   ==============
Net income per Limited Partnership Interest               
  (683,204 issued and outstanding)         $        6.30    $        5.32
                                           ==============   ==============
Distributions to General Partner           $     609,876    $     521,124
                                           ==============   ==============
Distributions to Limited Partners          $   5,488,876    $   4,690,110
                                           ==============   ==============
Distributions per Limited Partnership 
  Interest:
    Taxable                                $        6.15    $        5.25
                                           ==============   ==============
    Tax-exempt                             $        8.18    $        6.99
                                           ==============   ==============

  The accompanying notes are an integral part of the financial statements.
<PAGE>
                     BALCOR EQUITY PENSION INVESTORS-III
                      A REAL ESTATE LIMITED PARTNERSHIP
                      (An Illinois Limited Partnership)

                      STATEMENTS OF INCOME AND EXPENSES
              for the quarters ended September 30, 1995 and 1994
                                 (Unaudited)

                                                1995             1994
                                           --------------   --------------
Income:
  Rental                                   $   3,269,756    $   3,228,938
  Service                                        626,654          650,901
  Participation in income of joint           
    ventures with affiliates                     354,541          267,121
  Interest on short-term investments             158,100          112,270
                                           --------------   --------------
      Total income                             4,409,051        4,259,230
                                           --------------   --------------
Expenses:
  Depreciation                                   742,907          754,276
  Amortization of deferred expenses               18,265           18,383
  Property operating                           1,245,981        1,463,785
  Real estate taxes                              395,764          431,929
  Property management fees                       185,228          176,714
  Administrative                                 167,449          195,708
                                           --------------   --------------
      Total expenses                           2,755,594        3,040,795
                                           --------------   --------------
Net income                                 $   1,653,457    $   1,218,435
                                           ==============   ==============
Net income allocated to General Partner    $     246,137    $     203,413
                                           ==============   ==============
Net income allocated to Limited Partners   $   1,407,320    $   1,015,022
                                           ==============   ==============
Net income per Limited Partnership Interest               
  (683,204 issued and outstanding)         $        2.06    $        1.49
                                           ==============   ==============
Distribution to General Partner            $     262,460    $     173,708
                                           ==============   ==============
Distribution to Limited Partners           $   2,362,136    $   1,563,370
                                           ==============   ==============
Distribution per Limited Partnership 
  Interest:
  Taxable                                  $        2.65    $        1.75
                                           ==============   ==============
  Tax-exempt                               $        3.52    $        2.33
                                           ==============   ==============

  The accompanying notes are an integral part of the financial statements.
<PAGE>
                     BALCOR EQUITY PENSION INVESTORS-III
                      A REAL ESTATE LIMITED PARTNERSHIP
                      (An Illinois Limited Partnership)

                           STATEMENTS OF CASH FLOWS
            for the nine months ended September 30, 1995 and 1994
                                 (Unaudited)        

                                                1995             1994
                                           --------------   --------------
Operating activities:
  Net income                               $   5,053,039    $   4,307,790
  Adjustments to reconcile net income to 
    net cash provided by operating 
    activities:
      Participation in income of joint
        ventures with affiliates              (1,354,407)      (1,195,507)
      Depreciation of properties               2,228,722        2,246,453
      Amortization of deferred expenses           54,795           54,359
      Net change in:
        Accounts and accrued interest
          receivable                             593,500         (198,083)
        Prepaid expenses                         (80,787)          63,022
        Accounts payable                        (362,104)         121,138
        Due to affiliates                        (72,413)          91,993
        Accrued liabilities                      (57,436)         (52,522)
        Security deposits                         23,602           (2,542)
                                           --------------   --------------
  Net cash provided by operating activities    6,026,511        5,436,101
                                           --------------   --------------
Investing activities:
  Capital contribution to joint venture
    with an affiliate                                             (26,096)
  Distributions from joint ventures with 
    affiliates                                 1,611,801        1,806,277
  Improvements to property                      (232,255)        (145,274)
                                           --------------   --------------
  Net cash provided by investing activities    1,379,546        1,634,907
                                           --------------   --------------
Financing activities:
  Distributions to Limited Partners           (5,488,876)      (4,690,110)
  Distributions to General Partner              (609,876)        (521,124)
  Payment of deferred expenses                                    (28,816)
                                           --------------   --------------
  Cash used in financing activities           (6,098,752)      (5,240,050)
                                           --------------   --------------
Net change in cash and cash equivalents        1,307,305        1,830,958
Cash and cash equivalents at beginning
  of period                                    9,862,343        8,268,552
                                           --------------   --------------
Cash and cash equivalents at end of period $  11,169,648    $  10,099,510
                                           ==============   ==============

    The accompanying notes are an integral part of the financial statements.
<PAGE>
                      BALCOR EQUITY PENSION INVESTORS-III
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                         NOTES TO FINANCIAL STATEMENTS

1. Accounting Policy:

A reclassification has been made to the previously reported 1994 financial
statements in order to provide comparability with the 1995 statements.  This
reclassification has not changed the 1994 results.  In the opinion of
management, all adjustments necessary for a fair presentation have been made to
the accompanying statements for the nine months and quarter ended September 30,
1995, and all such adjustments are of a normal and recurring nature.

2. Transactions with Affiliates:

Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended:

                                             Paid          
                                   ------------------------
                                    Nine Months   Quarter     Payable
                                   -------------  --------   ---------    
   Reimbursement of expenses to
     the General Partner, at cost      $241,177    $36,843     $30,560 

3. Subsequent Event:

In October 1995, the Partnership made a distribution of $1,563,370 ($1.75 per
Taxable Interest and $2.33 per Tax-exempt Interest) to the holders of Limited
Partnership Interests for the third quarter of 1995.
<PAGE>
                      BALCOR EQUITY PENSION INVESTORS-III

                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

Balcor Equity Pension Investors-III A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1985 to make first mortgage
loans and to invest in and operate income-producing real property. The
Partnership raised $170,801,000 through the sale of Limited Partnership
Interests. The Partnership funded four first mortgage loans, two of which were
jointly funded with affiliates, and acquired five real property investments and
a minority joint venture interest with an affiliate in another real property
investment. All four properties collateralized by the Partnership's mortgage
loans were acquired through foreclosure, including the loans funded jointly
with affiliates, which were reclassified to investment in joint ventures with
affiliates. The Partnership currently has seven properties and three
investments in joint ventures with affiliates in its portfolio. 

Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1994 for a more complete understanding of
the Partnership's financial position.

Operations
----------

Improved operations at several of the Partnership's properties as well as at
one of the Partnership's joint venture investments caused net income to
increase during the nine months and quarter ended September 30, 1995 as
compared to the same periods in 1994. Further discussion of the Partnership's
operations is summarized below.

1995 Compared to 1994
---------------------

Unless otherwise noted, discussion of fluctuations between 1995 and 1994 refer
to both the nine months and quarters ended September 30, 1995 and 1994.

Primarily as a result of higher rental rates at the Green Trails Apartments,
rental income increased during the nine months ended September 30, 1995 as
compared to the same period in 1994.  

Improved operations at the Westech 360 Office Buildings resulting from higher
rental rates caused participation in income of joint ventures with affiliates
to increase during 1995 as compared to 1994.

Due to higher average cash balances and higher average interest rates, interest
income on short-term investments increased during 1995 as compared to 1994.

As a result of decreased leasing costs and repairs at the Erindale Centre
Shopping Center, property operating expense decreased during the quarter ended
September 30, 1995 when compared to the same period in 1994.

Primarily as a result of legal fees incurred during 1995 by the Partnership
relating to lawsuits involving the Partnership, administrative expense
<PAGE>
increased during the nine months ended September 30, 1995 as compared to the
same period in 1994.  However, due to the timing of the recognition of third
party accounting fees, administrative expense decreased during the third
quarter of 1995 as compared to the same period in 1994. 

Liquidity and Capital Resources
-------------------------------

The cash position of the Partnership increased as of September 30, 1995 as
compared to December 31, 1994. The Partnership generated cash flow from the
operation of its properties, which include the Partnership's investments in
joint ventures, and funded distributions to the Limited Partners and the
General Partner.

The Partnership defines cash flow generated from its properties as an amount
equal to the property's revenue receipts less property related expenditures.
During the nine months ended September 30, 1995 and 1994, all seven properties
owned by the Partnership, and the three properties in which the Partnership
holds minority joint venture interests, generated positive cash flow.  As of
September 30, 1995, the occupancy rates of the Partnership's residential
properties ranged from 94% to 99% and the occupancy rates of the commercial
properties ranged from 91% to 98%.  Many rental markets continue to remain
extremely competitive; therefore, the General Partner's goals are to maintain
high occupancy levels while increasing rents where possible and to monitor and
control operating expenses and capital improvement requirements at the
properties.

In October 1995, the Partnership paid a distribution of $1,563,370 ($1.75 per
Taxable Interest and $2.33 per Tax-exempt Interest) to the holders of Limited
Partnership Interests for the third quarter of 1995.  The level of this regular
quarterly distribution is consistent with the amount distributed for the second
quarter of 1995. Including the October 1995 distribution, Limited Partners have
received cumulative distributions of Net Cash Receipts of $81.45 per $250
Taxable Interest and $108.40 per Tax-exempt Interest. There have been no
distributions of Net Cash Proceeds. In October 1995, the Partnership also paid
$130,281 to the General Partner as its distributive share of the Net Cash
Receipts distributed for the third quarter of 1995 and made a contribution to
the Repurchase Fund of $43,427.  The General Partner expects that the cash flow
from property operations should enable the Partnership to continue making
quarterly distributions to Limited Partners. However, the level of future
distributions will be dependent on the amount of cash flow generated from
property operations as to which there can be no assurances.

During the nine months ended September 30, 1995, the General Partner, on behalf
of the Partnership, used amounts placed in the Repurchase Fund to repurchase
1,667 interests from Limited Partners at a cost of $310,242.

Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
                      BALCOR EQUITY PENSION INVESTORS-III
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                          PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K
-----------------------------------------

(a) Exhibits:

(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 3
to the Registrant's Registration Statement on Form S-11 dated September 25,
1985(Registration Statement No. 2-97579) and Form of Confirmation regarding
Interests in the Registrant set forth as Exhibit 4.2 to the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1992 (Commission File No. 0-14348)
are incorporated herein by reference.

(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1995 is attached hereto.

(b) Reports on form 8-K:  A Current Report on Form 8-K dated September 14,
1995, as amended by Form 8-K/A dated October 27, 1995, was filed reporting a
change in the Registrant's certifying public accountants.
<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.

                        BALCOR EQUITY PENSION INVESTORS-III
                        A REAL ESTATE LIMITED PARTNERSHIP


                        By:  /s/Thomas E. Meador
                             ---------------------------------                
                             Thomas E. Meador
                             President and Chief Executive Officer (Principal
                             Executive Officer) of Balcor Equity Partners-III,
                             the General Partner


                        By:  /s/Brian D. Parker
                             -----------------------------------
                             Brian D. Parker
                             Senior Vice President, and Chief Financial
                             Officer (Principal Accounting and Financial
                             Officer) of Balcor Equity Partners-III, the
                             General Partner



Date: November 14, 1995
      ----------------------
<PAGE>