Ownership Submission
FORM 4
Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES

Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the Investment Company Act of 1940
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(Print or Type Responses)
1. Name and Address of Reporting Person *
PALMOUR JOHN W
   2. Issuer Name and Ticker or Trading Symbol
CREE INC [CREE] 		5. Relationship of Reporting Person(s) to Issuer
(Check all applicable)
__X__ Director _____ 10% Owner
__X__ Officer (give title below) _____ Other (specify below)
EXECUTIVE VICE PRESIDENT
(Last)
(First)
(Middle)
C/O CREE, INC., 4600 SILICON DRIVE		 3. Date of Earliest Transaction (Month/Day/Year)
09/01/2005
(Street)

DURHAM, NC 27703		 4. If Amendment, Date Original Filed(Month/Day/Year)
 6. Individual or Joint/Group Filing(Check Applicable Line)
_X_ Form filed by One Reporting Person
___ Form filed by More than One Reporting Person
(City)
(State)
(Zip)
Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1.Title of Security
(Instr. 3)		 2. Transaction Date (Month/Day/Year) 2A. Deemed Execution Date, if any (Month/Day/Year) 3. Transaction Code
(Instr. 8)		 4. Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4 and 5)		 5. Amount of Securities Beneficially Owned Following Reported Transaction(s)
(Instr. 3 and 4)		 6. Ownership Form: Direct (D) or Indirect (I)
(Instr. 4)		 7. Nature of Indirect Beneficial Ownership
(Instr. 4)
Code V Amount (A) or (D) Price
Common Stock 08/30/2005   G V 10,050 D $ 0 752,683 D  
Common Stock 09/01/2005   A(1)   6,000 A $ 0 758,683 D (2)  

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Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned
(e.g., puts, calls, warrants, options, convertible securities)
1. Title of Derivative Security
(Instr. 3)		 2. Conversion or Exercise Price of Derivative Security 3. Transaction Date (Month/Day/Year) 3A. Deemed Execution Date, if any (Month/Day/Year) 4. Transaction Code
(Instr. 8)		 5. Number of Derivative Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4, and 5)		 6. Date Exercisable and Expiration Date
(Month/Day/Year)		 7. Title and Amount of Underlying Securities
(Instr. 3 and 4)		 8. Price of Derivative Security
(Instr. 5)		 9. Number of Derivative Securities Beneficially Owned Following Reported Transaction(s)
(Instr. 4)		 10. Ownership Form of Derivative Security: Direct (D) or Indirect (I)
(Instr. 4)		 11. Nature of Indirect Beneficial Ownership
(Instr. 4)
Code V (A) (D) Date Exercisable Expiration Date Title Amount or Number of Shares
Nonqualified Stock Option (Right to Buy) $ 25.47 09/01/2005   A   10,000   09/01/2006(3) 09/01/2012 Common Stock 10,000 $ 0 10,000 D  

Reporting Owners

Reporting Owner Name / Address Relationships
 Director  10% Owner  Officer  Other
PALMOUR JOHN W
C/O CREE, INC.
4600 SILICON DRIVE
DURHAM, NC 27703		   X     EXECUTIVE VICE PRESIDENT  

Signatures

 John W. Palmour   09/06/2005
**Signature of Reporting Person Date

Explanation of Responses:

* If the form is filed by more than one reporting person, see Instruction 4(b)(v).
** Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
(1) Shares of restricted stock awarded under the Cree, Inc. 2004 Long-Term Incentive Compensation Plan. One-fifth of the shares awarded will vest on each of September 1, 2006, September 1, 2007, September 1, 2008, September 1, 2009 and September 1, 2010, provided the recipient continues service as an employee of Cree, Inc. or a related "Employer" as defined in the Plan or as a member of the Board of Directors of Cree, Inc.
(2) Of the 758,683 shares held by Dr. Palmour, 718,683 shares are held by him directly and 40,000 shares are held by him indirectly by his spouse.
(3) Option vests and becomes exercisable as to one-third of the shares on each of September 1, 2006, September 1, 2007 and September 1, 2008 provided the recipient continues service as an employee of Cree, Inc. or a related "Employer" as defined in the Cree, Inc. 2004 Long-Term Incentive Compensation Plan or as a member of the Board of Directors of Cree, Inc.

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