OUTLINE: This is a randomized study. Patients are stratified according to stage (I and II vs III and IV). Patients are assigned to 1 of 2 treatment arms. Arm I consists of fludarabine and chimeric anti-CD20 monoclonal antibody IDEC-C2B8 (rituximab) induction, and arm II consists of fludarabine induction. Arm I: Rituximab is administered IV over 4 hours on day 1, on day 3, and over 1 hour on day 5 of week 1. Subsequent doses are given over 1 hour on day 1 every 4 weeks for a total of 6 courses. Fludarabine IV is administered over 10-30 minutes daily for 5 days during weeks 1, 5, 9, 13, 17, and 21 for a total of 6 courses. Following the sixth course of fludarabine, patients undergo clinical staging and are then observed for an additional 2 months, after which they undergo repeat clinical staging, including bone marrow aspiration. Patients achieving a complete or partial response or stable disease then proceed to consolidation therapy consisting of weekly intravenous infusions of rituximab once weekly for 4 weeks. Arm II (Fludarabine Induction): Patients receive fludarabine IV over 10-30 minutes daily for 5 days during weeks 1, 5, 9, 13, 17, and 21 for a total of 6 courses. Patients then proceed as in arm I. Patients are followed every 3 months for 1 year, and then every 6 months thereafter.