<PAGE>

                                                               Filed Pursuant to
                                                                  Rule 424(b)(3)
                                                                 and Rule 424(c)
                                                       Registration No. 33-98728




                               CREE RESEARCH, INC.


                    PROSPECTUS SUPPLEMENT DATED MAY 24, 1996

               (SUPPLEMENTING PROSPECTUS DATED DECEMBER 18, 1995)


         This Prospectus Supplement shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.

         This Prospectus Supplement updates and supplements the Prospectus dated
December 18, 1995, which was filed in conjunction with Registration Statement on
Form S-3, Registration No. 33-98728 (the "Prospectus"), to reflect changes
resulting from (i) the allocation and issuance to the Selling Shareholders of
Extra Shares as described on page 13 of the Prospectus, and (ii) transfers known
to the Company of Common Shares and Warrants in non-market transactions among
the Selling Shareholders which occurred subsequent to the date of the
Prospectus. This Prospectus Supplement does not reflect changes resulting from
market transactions involving the Common Shares or Extra Shares.




         THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
         ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE
         "RISK FACTORS" BEGINNING ON PAGE 3 OF PROSPECTUS DATED DECEMBER 18,
         1995.



         THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
         SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
         NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
         COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
         SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.





<PAGE>



                              SELLING SHAREHOLDERS

         This Prospectus Supplement relates to 1,514,400 shares of Common Stock
of the Company, of which (i) 800,000 shares of Common Stock (the "Common
Shares") were issued pursuant to Subscription Agreements by and between the
Company and the Selling Shareholders, (ii) 200,000 shares of Common Stock (the
"Warrant Shares") are issuable pursuant to warrants issued by the Company to the
Selling Shareholders, (iii) 279,467 of a total of 414,400 shares of Common Stock
(the "Extra Shares") allocated for such purpose were issued to the Selling
Shareholders pursuant to certain price protection provisions of the Subscription
Agreements, and (iv) 100,000 shares of Common Stock (the "Placement Agent
Warrant Shares") are issuable pursuant to warrants issued by the Company to the
Placement Agents as compensation for their assistance in locating sources of
capital for the Company.

         Set forth below is a list and description of each Selling Shareholder,
together with the number of Shares beneficially owned, the number of Shares
being offered, and the number of Shares (and the percent of the class) to be
owned after completion of the offering.



<TABLE>
<CAPTION>
=============================================================================================================================
                    Material                                                                                 Percent
                    Relationship                Securities                         Securities                Common
                    Had With the                Beneficially                       Beneficially              Stock Owned
Name of             Company Within              Owned As of          Securities    Owned After               After
Selling             Past Three                  October 15,          Offered       Completion of             Completion
Shareholder         Years (1)                   1995 (2)             Hereby (3)    Offering (4)              of Offering
- ----------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                         <C>                  <C>           <C>                        <C>  
Trustees of
General                    shareholder              1,262,500        79,967           1,200,000              11.5%
Electric
Pension Trust
- ----------------------------------------------------------------------------------------------------------------------------
Rahn & Rodmer              shareholder                 37,500        47,980               0                    *
- ----------------------------------------------------------------------------------------------------------------------------
Mid Lakes
Distr. Profit              shareholder                  5,000        12,794               0                    *
Sharing Plan                                                          (5)
- ----------------------------------------------------------------------------------------------------------------------------
Hollub Heating                                                         0
Profit Sharing             shareholder                  5,000         (5)                 0                    *
Plan
- ----------------------------------------------------------------------------------------------------------------------------
WNC                        shareholder                139,000        31,987            114,000                 *
Corporation
- ----------------------------------------------------------------------------------------------------------------------------
HDC Group                  shareholder                 18,750        3,750                0                    *
L.L.C.                                                                (5)
- ----------------------------------------------------------------------------------------------------------------------------
Rosewood                   shareholder                  2,500        3,199                0                    *
Partners, L.P.
- ----------------------------------------------------------------------------------------------------------------------------
K.A.M. Group,              shareholder                  6,250        7,997                0                    *
Inc.
- ----------------------------------------------------------------------------------------------------------------------------
M.D. Funding,              shareholder                  2,500        3,199                0                    *
Inc.
- ----------------------------------------------------------------------------------------------------------------------------
Barry                      shareholder                 67,500        63,973            17,500                  *
Nathanson
Assoc.
- ----------------------------------------------------------------------------------------------------------------------------
Robert Kantor              shareholder                142,000       153,536            22,000                  *
- ----------------------------------------------------------------------------------------------------------------------------
Tudor BVI                  shareholder                101,026       129,258               0                    *
Futures, LTD




                                        2


<PAGE>

                    Material                                                                                 Percent
                    Relationship                Securities                         Securities                Common
                    Had With the                Beneficially                       Beneficially              Stock Owned
Name of             Company Within              Owned As of          Securities    Owned After               After
Selling             Past Three                  October 15,          Offered       Completion of             Completion
Shareholder         Years (1)                   1995 (2)             Hereby (3)    Offering (4)              of Offering
- -----------------------------------------------------------------------------------------------------------------------------
Raptor Global             shareholder                   41,535      53,143                0                     *
Fund, LTD
- -----------------------------------------------------------------------------------------------------------------------------
Raptor Global             shareholder                   30,815      39,427                0                     *
Fund, LP
- -----------------------------------------------------------------------------------------------------------------------------
Tudor                     shareholder                   14,125      18,072                0                     *
Arbitrage
Partners, L.P.
- -----------------------------------------------------------------------------------------------------------------------------
Par Investment            shareholder                   70,000      75,563                0                     *
Partners, L.P.                                                       (5)
- -----------------------------------------------------------------------------------------------------------------------------
Worthington               shareholder                   37,500      40,480                0                     *
Growth, L.P.                                                         (5)
- -----------------------------------------------------------------------------------------------------------------------------
Professional              shareholder                   50,000      63,973                0                     *
Edge Fund,
L.P.
- -----------------------------------------------------------------------------------------------------------------------------
Dreshertowne              shareholder                   25,000      31,987                0                     *
- -----------------------------------------------------------------------------------------------------------------------------
Generation
Capital                   shareholder                   45,200      57,576               200                    *
Associates
- -----------------------------------------------------------------------------------------------------------------------------
Everest                   shareholder                  221,800     119,713             110,900                  *
Capital Fund,                                                        (5)
L.P.
- -----------------------------------------------------------------------------------------------------------------------------
Everest                   shareholder                  278,200     150,154             139,100                1.2%
Capital                                                              (5)
International
Ltd.
- -----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley            shareholder                 1,500(6)     87,250               1,500                   *
& Co.                                                                (7)
Incorporated
- -----------------------------------------------------------------------------------------------------------------------------
David Levin               shareholder                   12,750      6,746               6,500                   *
                                                                     (7)
- -----------------------------------------------------------------------------------------------------------------------------
Ronit Sucoff              shareholder                   16,938      6,746               6,000                   *
                                                                     (7)
- -----------------------------------------------------------------------------------------------------------------------------
Helen Kohn                shareholder                   33,937      6,746              23,000                   *
                                                                     (7)
=============================================================================================================================
</TABLE>


*        Less than 1%.

(1)      The term "shareholder" refers to either shareholders or warrant holders
         of the Company.

(2)      Includes Common Stock as to which the holder has sole or shared voting
         or investment power and Common Stock issuable pursuant to options
         and/or warrants exercisable within the next 60 days.


                                        3


<PAGE>



(3)      Includes, for each Selling Shareholder (excluding Morgan Stanley & Co.
         Incorporated) Extra Shares issued to such Selling Shareholder pursuant
         to the terms of the Subscription Agreements, as described on page 5 
         hereof.

(4)      Is based on securities beneficially owned as of October 15, 1995 and
         assumes all Shares being registered in this offering will be sold.
         However, to the best of the Company's knowledge, the holders of such
         securities have no commitment to anyone to sell all or part of the
         securities being registered.

(5)      Some or all of the securities offered on behalf of this Selling
         Shareholder were transferred to certain of the other Selling
         Shareholders prior to the date of this Prospectus Supplement.

(6)      Reflects shares owned by Morgan Stanley Co. Incorporated ("Morgan
         Stanely") with a settlement date of October 18, 1995. Does not reflect
         shares as to which Morgan Stanley held a short position as of such
         date.

(7)      Includes Common Shares and Warrants transferred to this Selling
         Shareholder by certain of the Selling Shareholders.





         Set forth below is a list and description of each Placement Agent,
together with the number of Shares beneficially owned, the number of Shares
being offered, and the number of Shares (and the percent of the class) to be
owned after completion of the offering.


<TABLE>
<CAPTION>
==================================================================================================================================
                            Material                                                                                 Percent
                            Relationship                Securities                               Securities          Common
                            Had With the                Beneficially                             Beneficially        Stock Owned
Name of                     Company Within              Owned As of             Securities       Owned After         After
Placement                   Past Three                  October 15,             Offered          Completion of       Completion
Agent                       Years (1)                   1995 (2)                Hereby           Offering (3)        of Offering
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>                         <C>                     <C>             <C>                 
Harvey Kohn                 shareholder                      4,687(4)             4,687           0                  *
- ----------------------------------------------------------------------------------------------------------------------------------
Cary Sucoff                 shareholder                      4,688(4)             4,688           0                  *
- ----------------------------------------------------------------------------------------------------------------------------------
Rene Matthews               shareholder                         7,375             3,375         4,000                *
- ----------------------------------------------------------------------------------------------------------------------------------
Burt S. Davis,              consultant/                        19,425            19,425           0                  *
III                         shareholder
- ----------------------------------------------------------------------------------------------------------------------------------
Marion Bass                 shareholder                         8,325             8,325           0                  *
Securities
Group
- ----------------------------------------------------------------------------------------------------------------------------------
Herbert A.                  shareholder                       102,750             6,250        96,500                *
Hardt
- ----------------------------------------------------------------------------------------------------------------------------------
Alan Davidson               shareholder                        61,250             6,250        55,000                *
- ----------------------------------------------------------------------------------------------------------------------------------
Donald                      shareholder                        60,250             6,250        54,000                *
Erenberg
- ----------------------------------------------------------------------------------------------------------------------------------
Jeffrey A.                  shareholder                        15,750                 0           0                  *
Leerink                                                                             (5)
- ----------------------------------------------------------------------------------------------------------------------------------
Harlan P.                   shareholder                        17,728            17,728           0                  *
Kleiman
- ----------------------------------------------------------------------------------------------------------------------------------
Robert K.
Schacter                    shareholder                         5,522             5,522           0                  *


          4


<PAGE>




- ----------------------------------------------------------------------------------------------------------------------------------
Financial West
Group                       shareholder                        1,750            1,750            0                        *
===================================================================================================================================
</TABLE>


*        Less than 1%.

(1)      The term "shareholder" refers to either shareholders or warrant holders
         of the Company.

(2)      Includes Common Stock as to which the holder has sole or shared voting
         or investment power and Common Stock issuable pursuant to options
         and/or warrants exercisable within the next 60 days.

(3)      Is based on securities beneficially owned as of October 15, 1995 and
         assumes all Shares being registered in this offering will be sold.
         However, to the best of the Company's knowledge, the holders of such
         securities have no commitment to anyone to sell all or part of the
         securities being registered.

(4)      Does not include 18,750 Shares beneficially owned by HDC Group, L.L.C.
         or its principals.

(5)      Some or all of the securities offered on behalf of this Selling
         Shareholder were transferred to certain Selling Shareholders prior to
         the date of this Prospectus Supplement.


         The Shares registered hereby were issued by the Company to the Selling
Shareholders in an offering qualifying for exemption from registration under the
Securities Act (the "Offering"). The Selling Shareholders acquired an aggregate
of 200,000 units in the Offering, each of which consisted of four (4) shares of
Common Stock and one (1) warrant to purchase one (1) share of Common Stock (the
"Units").

         The Subscription Agreements executed by the Company and the Selling
Shareholders provided that the 800,000 shares of Common Stock issued to the
Selling Shareholders in the Offering would be increased if the market price of
the Company's Common Stock decreased below $22.77 per share during the five
trading days following the release by the Company of its financial results for
the quarter ending December 31, 1995, with market price deemed to be the average
of the mean between the high and low trading prices on the five trading days
commencing on the release date of second quarter financial information. The
number of Extra Shares issued as a result of this provision was 279,467 shares,
the number of shares at the market price required to compensate the Selling
Shareholder for the amount by which $22.77 exceeded the market price, but not
more than $7.77 per share of losses. Only shares still held by a Selling
Shareholder at the end of the five trading days after the release date qualified
such Selling Shareholder for Extra Shares. The Company agreed to register an
additional 414,400 shares of Common Stock to accommodate any Extra Shares it may
be required to issue pursuant to the terms of the Subscription Agreements.



                                        5


<PAGE>





                    PROSPECTUS SUPPLEMENT DATED MAY 24, 1996
               (SUPPLEMENTING PROSPECTUS DATED DECEMBER 18, 1995)


                               CREE RESEARCH, INC.


                                TABLE OF CONTENTS




<TABLE>
<CAPTION>
                                                                                                                  PAGE


<S>                                                                                                              <C>
Selling Shareholders..............................................................................................2
</TABLE>




         No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus Supplement in
connection with this offering, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus Supplement does not constitute an offer to sell or
solicitation of an offer to buy, any securities other than the registered
securities to which it relates, or an offer to or solicitation of any person in
any jurisdiction in which such offer or solicitation would be unlawful. The
delivery of this Prospectus Supplement at any time does not imply that
information herein is correct as of any time subsequent to its date.




                                        6