  We study compactification of heterotic strings to three dimensions on
orbifolds of G_2 holonomy. We consider the standard embedding and show that the
gauge group is broken from E_8 x E_8 or SO(32) to F_4 x E_8 or SO(25)
respectively. We also compute the spectrum of massless states and compare with
the results obtained from reduction of the 10-dimensional fields. Non-standard
embeddings are discussed briefly. For type II compactifications we verify that
IIB and IIA have equal massless spectrum.
