<PAGE>   1
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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: 1-9988

                               REXENE CORPORATION
             (Exact name of Registrant as Specified in its Charter)

            DELAWARE                                             75-2104131
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

           5005 LBJ FREEWAY
            DALLAS, TEXAS                                           75244
(Address of principal executive offices)                          (Zip code)

                                 (972) 450-9000
              (Registrant's telephone number, including area code)

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
                                              ---    ---

             APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  Yes  X   No 
                           ---     ---

At October 25, 1996, 18,806,034 shares of common stock, par value $0.01 per
share, of Rexene Corporation were outstanding.

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<PAGE>   2
                      REXENE CORPORATION AND SUBSIDIARIES


<TABLE>
<CAPTION>
                                                                                                                       Page
                                                                                                                       ----
<S>                                                                                                                     <C>
PART I -- FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)

         Condensed Consolidated Statements of Income for the Three and
         Nine Months Ended September 30, 1996 and 1995  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

         Condensed Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 . . . . . . . . . . . . . 2

         Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995  . . . . 3

         Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations  . . . . . . . . . . . . 5

PART II -- OTHER INFORMATION

Item 1.  Legal Proceedings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
<PAGE>   3
PART I -- FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS.



                      REXENE CORPORATION AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (In thousands, except per share amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                Three Months Ended                Nine Months Ended
                                                                    September 30,                    September 30,
                                                               1996              1995            1996             1995   
                                                            ----------       -----------      ----------       ---------
<S>                                                         <C>              <C>              <C>              <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . .     $  150,456       $   154,113      $  436,605       $ 483,093
                                                            ----------       -----------      ----------       ---------

Operating expenses:
  Cost of sales . . . . . . . . . . . . . . . . . . . .        118,830           113,959         349,348         334,658
  Marketing, general and administrative . . . . . . . .         11,202            11,174          32,985          32,493
  Research and development  . . . . . . . . . . . . . .          2,151             2,655           6,325           6,916
                                                            ----------       -----------      ----------       ---------

                                                               132,183           127,788         388,658         374,067
                                                            ----------       -----------      ----------       ---------

Operating income  . . . . . . . . . . . . . . . . . . .         18,273            26,325          47,947         109,026
                                                            ----------       -----------      ----------       ---------

Interest expense  . . . . . . . . . . . . . . . . . . .         (3,706)           (4,878)        (12,256)        (19,492)
Interest income . . . . . . . . . . . . . . . . . . . .            382               680           1,502           2,257
Other, net  . . . . . . . . . . . . . . . . . . . . . .           (830)               68            (826)           ( 66)
                                                            -----------      -----------      -----------      --------- 

Income before income taxes  . . . . . . . . . . . . . .         14,119            22,195          36,367          91,725

Income tax expense  . . . . . . . . . . . . . . . . . .          5,516             8,235          13,802          34,384
                                                            ----------       -----------      ----------       ---------

Net income  . . . . . . . . . . . . . . . . . . . . . .     $    8,603       $    13,960      $   22,565       $  57,341
                                                            ==========       ===========      ==========       =========

Weighted average shares outstanding . . . . . . . . . .         19,185            19,143          19,163          19,131
                                                            ==========       ===========      ==========       =========

Net income per share  . . . . . . . . . . . . . . . . .     $     0.45       $      0.73      $     1.18       $    3.00
                                                            ==========       ===========      ==========       =========
</TABLE>





           See notes to condensed consolidated financial statements.





                                       1
<PAGE>   4
                      REXENE CORPORATION AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                       September 30,    December 31,
                                                                                           1996             1995        
                                                                                       -------------    ------------
<S>                                                                                      <C>             <C>           
                                  ASSETS                                                                               
                                                                                                                       
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $   6,740       $   47,258    
Deposit held in trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              -            3,547    
Accounts receivable, net  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         82,367           73,520    
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         69,594           62,257    
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          4,111            5,663    
Prepaid expenses and other  . . . . . . . . . . . . . . . . . . . . . . . . . . . .            338              531    
                                                                                         ---------       ----------    
                                                                                                                       
  Total current assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        163,150          192,776    
                                                                                                                       
Property, plant and equipment, net  . . . . . . . . . . . . . . . . . . . . . . . .        347,018          291,675    
Intangible assets, net  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         16,275           11,811    
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         24,839           24,329    
                                                                                         ---------       ----------    
                                                                                                                       
                                                                                         $ 551,282       $  520,591    
                                                                                         =========       ==========    
                                                                                                                       
                       LIABILITIES AND STOCKHOLDERS' EQUITY                                                            
                                                                                                                       
Accounts payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $  37,895       $   29,768    
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         14,284           14,319    
Accrued interest  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          6,854            1,714    
Income taxes payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2,618           30,778    
Employee benefits payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          5,375            7,781    
                                                                                         ---------       ----------    
                                                                                                                       
  Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .         67,026           84,360    
                                                                                                                       
Long-term debt  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        205,000          175,000    
Other noncurrent liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . .         65,949           67,107    
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         52,585           53,973    
                                                                                                                       
Stockholders' equity:                                                                                                  
  Preferred stock, par value $.01 per share; 1 million shares authorized; none issued                                  
    and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              -                -    
  Common stock, par value $.01 per share; 100 million shares authorized; 18.8 and                                      
     18.7 million shares issued and outstanding, respectively . . . . . . . . . . .            188              187    
  Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        111,476          111,247    
  Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         48,906           28,595    
  Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . .            152              122    
                                                                                         ---------       ----------    
                                                                                                                       
  Total stockholders' equity  . . . . . . . . . . . . . . . . . . . . . . . . . . .        160,722          140,151    
                                                                                         ---------       ----------    
                                                                                                                       
                                                                                         $ 551,282       $  520,591    
                                                                                         =========       ==========    
</TABLE>

           See notes to condensed consolidated financial statements.





                                       2
<PAGE>   5
                      REXENE CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                                  Nine Months Ended
                                                                                                     September 30,
                                                                                                1996             1995
                                                                                              --------        ----------
<S>                                                                                           <C>             <C>
Cash flows from operating activities:
Net income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ 22,565        $   57,341
                                                                                              --------        ----------
Adjustments to reconcile net income to net cash provided by (used for) operating
  activities:
  Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       17,353            15,792
  Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          161             5,473
  Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . .          936             2,626
  Change in:
    Deposit held in trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        3,547                 -
    Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (8,812)           (4,147)
    Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (7,324)            3,463
    Prepaid expenses and other  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          194               461
    Income taxes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (28,160)           28,794
    Accounts payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        8,123            (9,536)
    Accrued interest  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        5,140             4,960
    Employee benefits payable and accrued liabilities . . . . . . . . . . . . . . . . . .       (2,453)            1,754
    Other noncurrent liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1,542            (3,877)
  Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (746)            4,615
                                                                                              --------        ----------

  Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (10,499)           50,378
                                                                                              --------        ----------

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . .       12,066           107,719
                                                                                              --------        ----------

Cash flows from investing activities:
  Capital expenditures  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (71,431)          (33,595)
  Purchase of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (1,833)                -
                                                                                              --------        ----------

Net cash used for investing activities  . . . . . . . . . . . . . . . . . . . . . . . . .      (73,264)          (33,595)
                                                                                              --------           ------- 

Cash flows from financing activities:
  Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       30,000                 -
  Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (4,598)                -
  Repayment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            -          (100,000)
  Advance payment (repayment) from customer , net . . . . . . . . . . . . . . . . . . . .       (2,700)           24,100
  Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (2,252)                -
  Proceeds from issuance of common stock, net . . . . . . . . . . . . . . . . . . . . . .          230               365
                                                                                              --------        ----------

Net cash provided by (used for) financing activities  . . . . . . . . . . . . . . . . . .       20,680           (75,535)
                                                                                              --------        ---------- 

Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .      (40,518)           (1,411)
Cash and cash equivalents at beginning of period  . . . . . . . . . . . . . . . . . . . .       47,258            45,822
                                                                                              --------        ----------

Cash and cash equivalents at end of period  . . . . . . . . . . . . . . . . . . . . . . .     $  6,740        $   44,411
                                                                                              ========        ==========

Supplemental cash flow information:
  Cash paid for interest  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ 11,075        $   13,614
  Cash paid for income taxes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ 42,086        $    1,736
</TABLE>


           See notes to condensed consolidated financial statements.





                                       3
<PAGE>   6
                      REXENE CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

1.      GENERAL

Rexene Corporation manufactures and markets a wide variety of products through
two operating divisions, Rexene Products Company division ("Rexene Products")
and Consolidated  Thermoplastics Company division ("CT Film").  The products
range from value added specialty products, such as customized plastic films, to
commodity petrochemicals, such as styrene.  These products are used in a wide
variety of industrial and consumer-related applications.  The Company's
principal products are plastic film, polyethylene, polypropylene, Rextac(R)
amorphous polyalphaolefin ("Rextac") and styrene.  Rexene Corporation and its
subsidiaries are hereinafter sometimes collectively or separately referred to
as the "Company."

The accompanying condensed consolidated financial statements are unaudited;
however, in management's opinion, all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the results of
operations, financial position and cash flows for the periods shown, have been
made.  Results for interim periods are not necessarily indicative of those to
be expected for the full year.  The interim condensed consolidated financial
statements should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in the 1995 Annual Report on Form  10-K.

2.      INCOME TAXES

Income tax expense consists of the following (in thousands):
<TABLE>
<CAPTION>
                                               Three Months            Nine Months
                                            Ended September 30,     Ended September 30,                              
                                              1996       1995         1996      1995 
                                            --------    -------     --------   -------
<S>                                         <C>         <C>         <C>        <C>
Current:                                   
  Federal . . . . . . . . . .. . . . . . .  $ 4,823     $ 6,433     $ 11,742   $26,411
  State   . . . . . . . . . .. . . . . . .      808         231        1,899     2,500
Deferred  . . . . . . . . . .. . . . . . .     (115)      1,571          161     5,473
                                            --------    -------     --------   -------
                                           
                                            $ 5,516     $ 8,235     $ 13,802   $34,384
                                            =======     =======     ========   =======
</TABLE>
3.       INVENTORIES

Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
                                                                   September        December    
                                                                   30,  1996        31, 1995                     
                                                                   ---------        --------
<S>                                                                 <C>             <C>      
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,964         $20,144  
Work in progress  . . . . . . . . . . . . . . . . . . . . . . . . .   8,627           5,356  
Finished goods  . . . . . . . . . . . . . . . . . . . . . . . . . .  34,003          36,757  
                                                                    -------         -------  
                                                                                             
                                                                    $69,594         $62,257  
                                                                    =======         =======  
</TABLE>
4.       PROPERTY, PLANT AND EQUIPMENT

The cost and accumulated depreciation of property, plant and equipment are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                   September        December    
                                                                   30,  1996        31, 1995                     
                                                                   ---------        --------
<S>                                                                 <C>             <C>      
Property, plant and equipment . . . . . . . . . . . . . . . . . . .  419,028        $347,527
Less accumulated depreciation . . . . . . . . . . . . . . . . . . .  (72,010)        (55,852)
                                                                    --------        -------- 
                                                                    $347,018        $291,675
                                                                    ========        ========
</TABLE>





                                       4
<PAGE>   7



5.       INTANGIBLE ASSETS

The cost and accumulated amortization of intangible assets are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                        September         December
                                                                                        30, 1996          31, 1995 
                                                                                        ---------         --------
<S>                                                                                     <C>               <C>
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ 14,333          $  9,735
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .       (3,927)           (2,991)
                                                                                        --------          -------- 
                                                                                                         
                                                                                          10,406             6,744
                                                                                        --------          --------
                                                                                                         
Reorganization value in excess of amounts allocable to identifiable assets  . . . .        4,298             4,298
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .       (1,370)           (1,171)
                                                                                        --------          -------- 
                                                                                                         
                                                                                           2,928             3,127
                                                                                        --------          --------
                                                                                                         
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        7,377             5,544
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .       (4,436)           (3,604)
                                                                                        --------          -------- 
                                                                                                         
                                                                                           2,941             1,940
                                                                                        --------          --------
                                                                                                         
                                                                                        $ 16,275          $ 11,811
                                                                                        ========          ========
</TABLE>

6.      CONTINGENCIES

The Company is subject to extensive environmental laws and regulations
concerning, for example, emissions to the air, discharges to surface and
subsurface waters and the generation, handling, storage, transportation,
treatment and disposal of waste and other materials.  The Company believes
that, in light of its historical expenditures, it will have adequate resources
to conduct its operations in compliance with currently applicable environmental
and health and safety laws and regulations.  However, in order to comply with
changing facility permitting and regulatory standards, the Company may be
required to make additional significant site or operational modifications.
Further, the Company has incurred and may in the future incur liability to
investigate and clean up waste or contamination at its current or former
facilities, or which it may have disposed of at facilities operated by third
parties.  On the basis of its investigation and analysis, management believes
that the approximately $19.5 million accrued in the September 30, 1996 balance
sheet is adequate for the total potential environmental liability with respect
to contaminated sites. However, no assurance can be given that all potential
liabilities arising out of the Company's present or past operations have been
identified or fully assessed or that the amounts that might be required to
investigate and remediate such sites will not be significant to the Company.
The Company continually reviews its estimates of potential environmental
liabilities.

The Company is a party to various litigation arising in the ordinary course of
business and to certain other litigation which are set forth in Note 18 to the
Consolidated Financial Statements included in the Company's 1995 Annual Report
on Form 10-K.  There have been no material changes to the litigation described
in the aforementioned Note 18, except as described in Part II below.

Although there can be no assurance of the final resolution of such litigation,
the Company believes that, based upon its current knowledge of the facts of
each case, it  has meritorious defenses to the various claims made and intends
to defend each lawsuit vigorously, and the Company does not believe that the
outcome of any of these lawsuits will have a material adverse effect on the
Company's financial position, results of operations or cash flows.





                                       5
<PAGE>   8


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
      
OVERVIEW

The polyethylene, polypropylene and styrene markets in which the Company
competes are cyclical markets that are sensitive to relative changes in supply
and demand, which are in turn affected by general economic conditions.  The
Company's plastic film and Rextac(R) polymer businesses are generally less
sensitive to the economic cycles.  Historically, the cyclical segments have
experienced alternating periods of tight supply and rising prices and profit
margins, followed by periods of large capacity additions resulting in
oversupply and declining prices and profit margins.

A significant improvement in domestic economic growth occurred between the
second half of 1994 and the second quarter of 1995 which resulted in greater
market demand, increased capacity utilization and higher domestic and export
prices.  This increase in demand enabled the Company and the industry in
general to increase selling prices significantly during this period  even
though feedstock costs were relatively stable.  During the second half of 1995
through the first quarter of 1996, the domestic petrochemical and polymer
markets experienced a decrease in demand and selling prices due to several
factors, including inventory reductions by customers, the slowdown in economic
growth in the United States and a decrease in exports, particularly to the
Chinese market.  In addition, prices for these products were influenced by
industry capacity additions  in 1995.  Beginning in the second quarter of 1996,
demand and selling prices for polymers stabilized and selling prices for
polyethylene and polypropylene polymers and plastic film increased since that
time. The Company's average selling price for styrene and Rextac(R) polymers
have remained relatively stable since the first quarter of 1996.

Principal raw materials purchased by the Company consist of ethane and propane
extracted from natural gas liquids ("NGL"), propylene and benzene (all four of
which are referred to as "feedstocks") for the polymer and styrene businesses
and polyethylene resins for the film business.  Low  industry inventory levels
of crude oil, natural gas and NGL feedstocks and unexpected supply disruptions
caused feedstock prices to increase substantially during the first nine months
of 1996.  Feedstocks accounted for 29% of the Company's cost of sales for the
first nine months of 1996.  As a result, the Company's ability to pass on
increases in feedstock costs to customers has a significant impact on operating
results.  Currently, the feedstock supplies available  in Odessa, Texas are
adequate for the Company's processing requirements.               


RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 1995

The Company's overall sales and profitability were lower in the third quarter
of 1996 as compared to the third quarter of 1995.  As discussed above, the
petrochemical and polymer markets in which the Company participates were
stronger in the third quarter of 1995 as compared to the third quarter of 1996.
Net sales decreased $3.7 million (or 2%) from the third quarter of 1995 to the
third quarter of 1996 principally due to lower average sales prices in all
major product lines except polyethylene.  Plastic film sales decreased $2.5
million (or 6%)  principally due to a decrease in average sales price of 5
cents per pound. Styrene sales decreased $8.8 million (or 29%) principally due
to a decrease in average sales price of  9 cents per pound and a decrease  in
sales volumes of 6.3 million pounds principally due to scheduled maintenance
work which shut down operations for approximately two weeks.  Polyethylene
sales increased $0.6 million (or 2%) principally due to a increase in sales
volumes of 1.2 million pounds.  Polypropylene sales decreased $0.9 million (or
4%) principally due to a decrease in the average sales price of 1 cent per
pound and a decrease in sales volume of 0.9 million pounds.  Rextac(R) polymer
sales increased $2.0 million (or 36%) principally due to an increase in sales
volume of 4.1 million pounds.  Other sales increased $5.8 million principally
due to an increase in excess feedstock sales.                                  

The Company's gross profit percentage decreased from 26% for the three months
ended September 30, 1995 to 21% for the three months ended September 30, 1996
principally due to higher feedstock prices for ethane, propane, and benzene and
a decrease





                                       6
<PAGE>   9
in sales prices discussed above.  Marketing, general and administrative
expenses and research and development expenses decreased slightly for the third
quarter of 1996 as compared to the third quarter of 1995.

Due primarily to the factors discussed above, operating income decreased $8.1
million (or 31%) for the three months ended September 30, 1996 as compared to
the corresponding period in 1995.  Net interest expense decreased $0.9 million
(or 21%) in the third  quarter of 1996 as compared to the third quarter of 1995
principally due to increased capitalized interest on capital improvements
offset by interest on bank borrowings in the third quarter of 1996.  For the
third quarter of 1996, other non-operating expenses included costs of $0.5
million  related to the Company's response to an unsolicited takeover attempt.
Income tax expense decreased $2.7 million (or 33%) in the third quarter of 1996
as compared to the third quarter of 1995 principally due to the decrease in
operating income discussed above.  Due primarily to the factors discussed
above, the Company's net income decreased $5.4 million (or 38%) in the third
quarter of 1996 as compared to the third quarter of 1995.

RESULTS OF  OPERATIONS  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED
TO THE NINE MONTHS ENDED SEPTEMBER 30, 1995

The Company's overall sales and profitability were lower in the first nine
months of 1996 as compared to the first nine months of 1995.  As discussed
above, the petrochemical and polymer markets in which the Company participates
were stronger in the first nine months of 1995 as compared to the first nine
months of 1996.  Net sales decreased $46.5 million (or 10%) from the first nine
months of 1995 to the first nine months of 1996 principally due to lower
average sales prices in all major product lines, partially offset by increases
in sales volumes in all product lines except plastic film.  Plastic film sales
decreased $20.9 million (or 15%)  principally due to a decrease in average
sales price of  5 cents per pound and a decrease in sales volumes of 13.0
million pounds as a result of changing technology in the disposable diaper
industry.  Styrene sales decreased $29.1 million (or 30%) principally due to a
decrease in average sales price of 15 cents per pound, partially offset by an
increase in sales volumes of 16.8 million pounds.  Polyethylene sales decreased
$11.7 million (or  9%) principally due to a decrease in average sales price of
8 cents per pound, partially offset by an increase in sales volumes of 18.3
million pounds.  Polypropylene sales decreased $2.5 million (or 4%) principally
due to a decrease in average sales price of 3 cents per pound, partially offset
by an increase in sales volumes of 1.7 million pounds.  Rextac(R) polymer sales
increased $2.7 million (or 15%) principally due to an increase in sales volumes
of 5.5 million pounds.  Other sales increased $15.1 million principally due to
an increase in excess feedstock sales.

The Company's gross profit percentage decreased from 31% for the nine months
ended September 30, 1995 to 20% for the nine months ended September 30, 1996
principally due to higher feedstock prices for ethane, propane, and benzene and
a decrease in sales prices discussed above.  Marketing, general and
administrative expenses and research and development expenses remained
relatively stable for the first nine months of 1995 as compared to the first
nine months of 1996.

Due primarily to the factors discussed above, operating income decreased $61.1
million (or 56%) for the nine months ended September 30, 1996 as compared to
the corresponding period in 1995.  Net interest expense decreased $6.5 million
(or 38%) in the first nine months  of 1996 as compared to the first nine months
of 1995 principally due to the repayment of bank debt in the first half of 1995
and increased capitalized interest on capital improvements offset by interest
on bank borrowings in the third quarter of 1996.  For the first nine months of
1996, other non-operating expenses included costs of $0.5 million  related to
the Company's response to an unsolicited takeover attempt.  Income tax expense
decreased $20.6 million (or 60%) in the first nine months of 1996 as compared
to the first nine months of 1995 principally due to the decrease in operating
income discussed above.  Due primarily to the factors discussed above, the
Company's net income decreased $34.8 million (or 61%) in the first nine months
of 1996 as compared to the first nine months of 1995.

LIQUIDITY AND CAPITAL RESOURCES

For the nine  months ended September 30, 1996, net cash provided by operating
activities decreased $95.7 million as compared to the comparable period in
1995.  This decrease was principally due to the payment in March 1996 of the
Company's 1995 federal income taxes of approximately $30 million, 1996 federal
income tax payments of $12.1 million and due to lower operating income
discussed above.





                                       7
<PAGE>   10
The Amended Credit Agreement, executed in April 1996, provides a new line of
credit to provide funds to finance portions of  the Company's capital
expenditure program and working capital requirements.  The Company's capital
expenditure program includes the construction of a flexible polyolefin polymer
plant, the modernization and expansion of its olefins plant and the
construction of a new linear low density polyethylene plant. As of October 25,
1996, the outstanding balance under the Amended Credit Agreement was $40
million.

On August 5, 1996, the Company executed an agreement with a bank for a $10
million uncommitted, unsecured line of credit (the "Unsecured Note") for day to
day cash flow needs.  As of October 25, 1996, there was no outstanding balance.

The Company believes that, based on current levels of operations and
anticipated growth, its cash flow from operations, together with other
available sources of liquidity, including the proceeds from the Amended Credit
Agreement, will be adequate to make scheduled payments of interest on the 11
3/4% Senior Notes due 2004, the Amended Credit Agreement and the Unsecured
Note,  to permit anticipated capital expenditures and to fund working capital
requirements.  However, the ability of the Company to satisfy these obligations
depends on a number of significant assumptions, including but not limited to,
the demand for the Company's products, raw material costs and other factors.

A number of potential environmental liabilities exist which relate to certain
contaminated property.  In addition, a number of potential environmental costs
relate to pending or proposed environmental regulations.  No assurance can be
given that all of the potential liabilities arising out of the Company's
present or past operations have been identified or that the amounts that might
be required to investigate and remediate such sites or comply with pending or
proposed environmental regulations can be accurately estimated. The Company has
approximately $19.5 million accrued in the September 30, 1996 balance sheet as
an estimate of its total potential environmental liability with respect to
investigating and remediating known and assessed contaminated sites.  If,
however, additional liabilities with respect to environmental contamination are
identified, there is no assurance that additional amounts that might be
required to investigate and remediate such potential sites would not have a
material adverse effect on the financial position, results of operations or
cash flows of the Company.  In addition, future regulatory developments could
restrict or possibly prohibit existing methods of environmental compliance.  At
this time, the Company is unable to determine the potential consequences such
possible future regulatory developments would have on its financial condition.
Management continually reviews its estimates of potential environmental
liabilities.  The Company does not currently carry environmental impairment
liability insurance to protect it against such contingencies because the
Company has found such coverage is available only at great cost and with broad
exclusions.

The discussions in this report contain both historical information and
forward-looking statements.  The forward-looking statements involve risks and
uncertainties that could affect the Company's future operations, markets,
products, services, prices and profitability.  These risks and uncertainties
include, but are not limited to, the demand for the Company's products,
economic conditions, customer inventory levels, competitive pricing pressures,
feedstock costs, changes in industry production capacities and operating rates,
competitive technology positions, and the failure of the Company to improve
operational efficiencies or develop and successfully market new products as
anticipated or complete construction projects on schedule.

PART II -- OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

Phillips Block Copolymer Litigation

As previously reported in Item 3 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, in March 1984, Phillips Petroleum Company
("Phillips") filed a lawsuit against the Company in the United States District
Court for the Northern District of Illinois, Eastern Division, seeking
injunctive relief, an unspecified amount of compensatory and treble damages.
The complaint alleged that the Company's copolymer process for polypropylene
infringed Phillip's two "block" copolymer patents, the last of which expired in
1994.  This action has been transferred to the United States District Court for
the Southern District of Texas, Houston Division.  Discovery proceedings in
this case have been completed.  The Company has filed a motion for summary
judgment.  Phillips also filed a motion for partial summary judgment.  Pursuant
to an agreement





                                       8
<PAGE>   11
among the parties, the court appointed a special master who conducted a hearing
on these motions and thereafter recommended to the court that the Company's
motion be granted and Phillip's motion be denied.  Thereafter, Phillips filed
motions to disqualify the special master, to reject the recommendation of the
special master and to enter partial summary judgment for Phillips.  The court
has entered an order denying Phillips' motion to disqualify the special master.
A hearing on these summary judgment motions was held on October 21, 1996 but no
ruling has been made.  In the Company's bankruptcy proceeding in 1992, Phillips
filed a proof of claim seeking in excess of $108 million based upon allegations
in this litigation.  The Company objected to the claim and elected to leave the
legal, equitable and contractual rights of Phillips unaltered, thereby allowing
this litigation to proceed without regard to the bankruptcy proceeding.


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)            Exhibits:

            None

(b)            Reports Submitted on Form 8-K:

                 None.

                                   SIGNATURE

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.

                                        REXENE CORPORATION
                                        Registrant
                                        
Date: October 25, 1996                  By: /s/ Geff Perera             
                                            -----------------------------------
                                            Geff Perera
                                            Executive Vice President and
                                            Chief Financial Officer





                                       9
<PAGE>   12
                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                  DESCRIPTION
-------                 -----------
<S>                     <C>
  27                    Financial Data Schedule

</TABLE>