Filed pursuant to Rule 424(b)(3)
                                                Registration No. 333-48486


                PROSPECTUS SUPPLEMENT NO. 1 DATED JULY 2, 2001
                     TO PROSPECTUS DATED NOVEMBER 7, 2000

                      TERAYON COMMUNICATION SYSTEMS, INC.

                        394,329 Shares of Common Stock


Please read this prospectus supplement in conjunction with the prospectus dated
November 7, 2000 (the "Prospectus"). The table on page 19 of the Prospectus
setting for the information concerning the selling stockholders is superseded by
the following table:

                             SELLING STOCKHOLDERS

In our acquisition of Digitrans, which we consummated in September 2000, we
issued to all of the selling stockholders shares of our common stock, and we
agreed to register all of those shares for resale. We also agreed to use
reasonable efforts to keep the registration statement effective until September
27, 2001. Our registration of the shares of common stock does not necessarily
mean that the selling stockholders will sell all or any of the shares.

The following table sets forth certain information regarding the beneficial
ownership of the common stock, as of June 29, 2001, by each of the selling
stockholders.

The information provided in the table below with respect to each selling
stockholder has been obtained from that selling stockholder. Except as otherwise
disclosed below, none of the selling stockholders has, or within the past three
years has had, any position, office or other material relationship with us.
Because the selling stockholders may sell all or some portion of the shares of
common stock beneficially owned by them, we cannot estimate the number of shares
of common stock that will be beneficially owned by the selling stockholders
after this offering. In addition, the selling stockholders may have sold,
transferred or otherwise disposed of, or may sell, transfer or otherwise dispose
of, at any time or from time to time since the date on which they provided the
information regarding the shares of common stock beneficially owned by them, all
or a portion of the shares of common stock beneficially owned by them in
transactions exempt from the registration requirements of the Securities Act of
1933.

Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated
by the Commission under the Securities Exchange Act of 1934. Unless otherwise
noted, each person or group identified possesses sole voting and investment
power with respect to shares, subject to community property laws where
applicable. None of the share amounts set forth below represents more than 1% of
our outstanding stock as of June 29, 2001, adjusted as required by rules
promulgated by the SEC.



Shares                                                                     Shares
Selling Stockholder                                 Number of Shares    Being Offered    Held in Escrow*
------------------------------------------------   -----------------    -------------    ---------------
                                                                                
Bear, Stearns Securities Corp. as
Pledgee/selling stockholder, selling through
Bear, Stearns & Co, Inc.                                296,465            296,465                0
The D.W. Thomas Companies, Inc.                          32,941             32,941           32,941
Ray Mason Truluck                                        23,187             23,187           23,187
Warren Harding Davis, Jr.                                20,868             20,868           20,868
Clayton Charles Dore                                     20,868             20,868           20,868


* 32,491 shares of our common stock are held in the name of Embassy & Co.
pursuant to an Indemnification Escrow Agreement with The D.W. Thomas Companies,
Inc. 64,923 shares of our common stock are held in the name of Embassy & Co.
pursuant to Retention Escrow Agreements with Mason Truluck, Warren Davis, Jr.
and Clayton Dore.