<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                  FORM 10-Q



(Mark One)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934


For the quarterly period ended           June 30, 2001       or
                                ---------------------------
[ ]   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

For the transition period from                       to
                                -------------------      ----------------------

Commission file number                       0-25606
                         ------------------------------------------------------

                        WELLS REAL ESTATE FUND VII, L.P.
-------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)


           Georgia                                    58-2022629
-------------------------------         --------------------------------------
(State or other jurisdiction of         (I.R.S. Employer Identification Number)
incorporation or organization)


6200 The Corners Pkwy., Norcross, Georgia                  30092
-------------------------------------------    --------------------------------
 (Address of principal executive offices)                (Zip Code)


Registrant's telephone number, including area code         (770) 449-7800
                                                    ---------------------------


--------------------------------------------------------------------------------
            (Former name, former address, and former fiscal year,
                         if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

               Yes   X       No
                    ---          ----
<PAGE>

                                   FORM 10-Q

                       WELLS REAL ESTATE FUND VII, L.P.

                     (A Georgia Public Limited Partnership)


                                     INDEX

<TABLE>
<CAPTION>
                                                                                                 Page No.
                                                                                                 --------
<S>                                                                                              <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Balance Sheets--June 30, 2001 and December 31, 2000                                            3

         Statements of Income for the Three and Six Months Ended June 30, 2001                          4
          and 2000

         Statements of Partners' Capital for the Year Ended December 31, 2000 and the Six               5
          Months Ended June 30, 2001

         Statements of Cash Flows for the Six Months Ended June 30, 2001                                6
          and 2000

         Condensed Notes to Financial Statements                                                        7

  Item 2.  Management's Discussion and Analysis of Financial Condition and Results                     10
           of Operations

PART II.  OTHER INFORMATION                                                                            12
</TABLE>

                                       2
<PAGE>

                        WELLS REAL ESTATE FUND VII, L.P.

                     (A Georgia Public Limited Partnership)


                                 BALANCE SHEETS




<TABLE>
<CAPTION>
                                                                             June 30,        December 31,
                                                                               2001              2000
                                                                           -----------       ------------
<S>                                                                        <C>               <C>
ASSETS:
 Investment in joint ventures (Note 2)                                     $16,030,919        $16,519,029
 Due from affiliates                                                           407,046            415,906
 Cash and cash equivalents                                                      32,256             55,216
 Prepaid expenses and other assets                                               2,447              2,375
                                                                           -----------        -----------
         Total assets                                                      $16,472,668        $16,992,526
                                                                           ===========        ===========

LIABILITIES AND PARTNERS' CAPITAL:
 Liabilities:
   Accounts payable                                                        $         0        $     4,752
   Partnership distributions payable                                           448,819            453,615
                                                                           -----------        -----------
         Total liabilities                                                     448,819            458,367
                                                                           -----------        -----------
 Partners' capital:
   Limited partners:
     Class A--2,057,190 units and 2,045,427 units as of June 30,
      2001 and December 31, 2000, respectively                              16,023,849         16,534,159
     Class B--360,827 units and 372,590 units as of June 30, 2001
      and December 31, 2000, respectively                                            0                  0
                                                                           -----------        -----------
         Total partners' capital                                            16,023,849         16,534,159
                                                                           -----------        -----------
         Total liabilities and partners' capital                           $16,472,668        $16,992,526
                                                                           ===========        ===========
</TABLE>

           See accompanying condensed notes to financial statements.

                                       3
<PAGE>

                        WELLS REAL ESTATE FUND VII, L.P.

                     (A Georgia Public Limited Partnership)


                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                          Three Months Ended              Six Months Ended
                                                       -----------------------        -----------------------
                                                       June 30,       June 30,        June 30,       June 30,
                                                         2001           2000            2001           2000
                                                       --------      ---------        --------      ---------
<S>                                                   <C>            <C>             <C>            <C>
REVENUES:
 Equity in income of joint ventures (Note 2)           $233,225      $ 238,543        $446,246      $ 506,927
 Interest income                                            147            593           2,309          1,147
                                                       --------      ---------        --------      ---------
                                                        233,372        239,136         448,555        508,074
                                                       --------      ---------        --------      ---------
EXPENSES:
 Legal and accounting                                     3,000          2,743          12,727         15,525
 Partnership administration                              20,766         19,468          29,638         28,491
 Computer costs                                           4,307          3,425           5,508          6,493
                                                       --------      ---------        --------      ---------
                                                         28,073         25,636          47,873         50,509
                                                       --------      ---------        --------      ---------
NET INCOME                                             $205,299      $ 213,500        $400,682      $ 457,565
                                                       ========      =========        ========      =========

NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS       $205,299      $ 373,078        $400,682      $ 860,744
                                                       ========      =========        ========      =========

NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS         $      0      $(159,578)       $      0      $(403,179)
                                                       ========      =========        ========      =========

NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED        $   0.10      $    0.18        $   0.20      $    0.42
                                                       ========      =========        ========      =========
 PARTNER UNIT

NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED
 PARTNER UNIT                                          $      0      $   (0.42)       $      0      $   (1.07)
                                                       ========      =========        ========      =========

CASH DISTRIBUTION PER CLASS A LIMITED PARTNER
 UNIT                                                  $   0.22      $    0.22        $   0.44      $    0.47
                                                       ========      =========        ========      =========
</TABLE>

           See accompanying condensed notes to financial statements.

                                       4
<PAGE>

                        WELLS REAL ESTATE FUND VII, L.P.

                     (A Georgia Public Limited Partnership)


                        STATEMENTS OF PARTNERS' CAPITAL

                      FOR THE YEAR ENDED DECEMBER 31, 2000

                     AND THE SIX MONTHS ENDED JUNE 30, 2001


<TABLE>
<CAPTION>
                                                        Limited Partners
                                     -----------------------------------------------------
                                             Class A                        Class B                                Total
                                     -----------------------------------------------------         General        Partners'
                                       Units         Amounts          Units         Amounts        Partners        Capital
                                     ---------     -----------       -------       ---------       --------      -----------
<S>                                  <C>           <C>               <C>             <C>          <C>            <C>
BALANCE, December 31, 1999           2,036,267     $17,125,194       381,750       $ 408,633             $0      $17,533,827

 Net income (loss)                           0       1,286,161             0        (403,179)             0          882,982
 Partnership distributions                   0      (1,882,650)            0               0              0       (1,882,650)
 Class B conversion elections            9,160           5,454        (9,160)         (5,454)             0                0
                                     ---------     -----------       -------       ---------       --------      -----------
BALANCE, December 31, 2000           2,045,427      16,534,159       372,590               0              0       16,534,159

 Net income                                  0         400,682             0               0              0          400,682
 Partnership distributions                   0        (910,992)            0               0              0         (910,992)
 Class B conversion elections           11,763               0       (11,763)              0              0                0
                                     ---------     -----------       -------       ---------       --------      -----------
BALANCE, June 30, 2001               2,057,190     $16,023,849       360,827       $       0             $0      $16,023,849
                                     =========     ===========       =======       =========       ========      ===========
</TABLE>

           See accompanying condensed notes to financial statements.

                                       5
<PAGE>

                        WELLS REAL ESTATE FUND VII, L.P.

                     (A Georgia Public Limited Partnership)


                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                  Six Months Ended
                                                                               -------------------------
                                                                                June 30,        June 30,
                                                                                  2001            2000
                                                                               ---------        ---------
<S>                                                                            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                                    $ 400,682        $ 457,565
 Adjustments to reconcile net income to net cash used in operating
  activities:
    Equity in income of joint ventures                                          (446,246)        (506,927)
    Changes in assets and liabilities:
      Prepaid expenses and other assets                                              (72)               0
      Accounts payable                                                            (4,752)           1,925
                                                                               ---------        ---------
        Net cash used in operating activities                                    (50,388)         (47,437)
                                                                               ---------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Distributions received from joint ventures                                      943,216          996,115
                                                                               ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Partnership distributions paid                                                 (915,788)        (930,033)
                                                                               ---------        ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                             (22,960)          18,645

CASH AND CASH EQUIVALENTS, beginning of year                                      55,216           81,697
                                                                               ---------        ---------
CASH AND CASH EQUIVALENTS, end of period                                       $  32,256        $ 100,342
                                                                               =========        =========
</TABLE>

           See accompanying condensed notes to financial statements.

                                       6
<PAGE>

                        WELLS REAL ESTATE FUND VII, L.P.

                     (A Georgia Public Limited Partnership)


                    CONDENSED NOTES TO FINANCIAL STATEMENTS

                                 JUNE 30, 2001

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   (a) General

   Wells Real Estate Fund VII, L.P. (the "Partnership") is a Georgia public
   limited partnership, with Leo F. Wells, III and Wells Partners, L.P., A
   Georgia nonpublic limited partnership, serving as General Partners. The
   Partnership was formed on December 1, 1992, for the purpose of acquiring,
   developing, owning, operating, improving, leasing, and otherwise managing
   income-producing commercial properties for investment purposes. The
   Partnership has two classes of limited partnership interest, Class A and
   Class B units. Limited partners shall have the right to change their prior
   elections to have some or all of their units treated as Class A units or
   Class B units one time during each quarterly accounting period. Limited
   partners may vote to, among other things, (a) amend the partnership
   agreement, subject to certain limitations, (b) change the business purpose or
   investment objectives of the Partnership, and (c) remove a general partner. A
   majority vote on any of the above described matters will bind the
   Partnership, without the concurrence of the general partners. Each limited
   partnership unit has equal voting rights, regardless of class.

   On April 6, 1994, the Partnership commenced an offering of up to $25,000,000
   of Class A or Class B limited partnership units ($10 per unit) pursuant to a
   Registration Statement on Form S-11 filed under the Securities Act of 1933.
   The Partnership commenced active operations when it received and accepted
   subscriptions for a minimum of 125,000 units on April 26, 1994. The
   Partnership terminated its offering on January 5, 1995, and received gross
   proceeds of $24,180,174 representing subscriptions from 1,910 Limited
   Partners.

   The Partnership owns interests in properties through the following joint
   ventures between the Partnership and other Wells Real Estate Funds: (i) Fund
   V, Fund VI, and Fund VII Associates, a joint venture between the Partnership,
   Wells Real Estate Fund V, L.P., and Wells Real Estate Fund VI, L.P. (the
   "Fund V-VI-VII Joint Venture"), (ii) Fund VI and Fund VII Associates, a joint
   venture between the Partnership and Wells Real Estate Fund VI, L.P. (the
   "Fund VI-Fund VII Joint Venture"), (iii) Fund II, III, VI, and VII
   Associates, a joint venture among the Partnership, Wells Fund II-III
   Associates and Wells Real Estate Fund VI, L.P. (the "Fund II-III-VI-VII Joint
   Venture"), (iv) Fund VII and Fund VIII Associates, a joint venture between
   the Partnership and Wells Real Estate Fund VIII, L.P. (the "Fund VII-Fund
   VIII Joint Venture"), (v) Fund VI, Fund VII, and Fund VIII Associates, a
   joint venture between the Partnership, Wells Real Estate Fund VI, L.P., and
   Wells Real Estate Fund VIII, L.P. (the "Fund VI-VII-VIII Joint Venture"), and
   (vi) Fund I, II, II-OW, VI, and VII Associates, a joint venture between the
   Partnership, Wells Real Estate Fund I, the Fund II and Fund II-OW Joint
   Venture, and Wells Real Estate Fund VI, L.P. (the "Fund I, II, II-OW, VI, and
   VII Joint Venture").

   As of June 30, 2001, the Partnership owned interests in the following
   properties through its ownership of the foregoing joint ventures: (i) a
   three-story office building located in Appleton,

                                       7
<PAGE>

   Wisconsin (the "Marathon Building"), (ii) two retail buildings located in
   Stockbridge, Georgia ("Stockbridge Village III"), (iii) a retail shopping
   center expansion in Stockbridge, Georgia ("Stockbridge Village I Expansion"),
   (iv) an office/retail center located in Roswell, Georgia ("Holcomb Bridge
   Road Property"), (v) a retail center located in Stockbridge, Georgia (the
   "Hannover Center"), (vi) a four-story office building located in
   Jacksonville, Florida (the "BellSouth Property"), (vii) an office building
   located in Gainesville, Florida ("CH2M Hill at Gainesville Property"), (viii)
   a retail center in Clemmons, North Carolina ("Tanglewood Commons"), and (ix)
   a retail center located in Cherokee County, Georgia ("Cherokee Commons").

   (b) Basis of Presentation

   The consolidated financial statements of the Partnership have been prepared
   in accordance with instructions to Form 10-Q and do not include all of the
   information and footnotes required by generally accepted accounting
   principles for complete financial statements. These quarterly statements have
   not been examined by independent accountants, but in the opinion of the
   General Partners, the statements for the unaudited interim periods presented
   include all adjustments, which are of a normal and recurring nature,
   necessary to present a fair presentation of the results for such periods. For
   further information, refer to the financial statements and footnotes included
   in the Partnership's Form 10-K for the year ended December 31, 2000.

2. INVESTMENT IN JOINT VENTURES

   The Partnership owns interests in nine properties through its ownership in
   joint ventures of which three are office buildings and five are retail
   centers, and one is a combined office and retail center. The Partnership does
   not have control over the operations of the joint ventures; however, it does
   exercise significant influence. Accordingly, investment in joint ventures is
   recorded on the equity method. For a description of the joint ventures and
   properties owned by the Partnership, please refer to the Partnership's Form
   10-K for the year ended December 31, 2000.

                                       8
<PAGE>

  SUMMARY OF OPERATIONS

  The following information summarizes the operations of the unconsolidated
  joint ventures in which the Partnership had ownership interests as of June 30,
  2001 and 2000, respectively.

<TABLE>
<CAPTION>
                                                                                         Partnership's Share
                                         Total Revenues            Net Income               of Net Income
                                     ----------------------  ----------------------   -----------------------
                                       Three Months Ended      Three Months Ended        Three Months Ended
                                     ----------------------  ----------------------   -----------------------
                                       June 30,    June 30,    June 30,    June 30,    June 30,     June 30,
                                         2001        2000        2001        2000        2001         2000
                                     ----------  ----------  ----------  ----------    --------     --------
<S>                                  <C>         <C>         <C>         <C>           <C>          <C>
Fund V-VI-VII Joint Venture          $  244,677  $  242,763  $  150,221  $  146,292    $ 62,657     $ 61,019
Fund VI-Fund VII Joint
  Venture                               182,840     159,955      38,853      61,642      21,447       34,689
Fund II-III-VI-VII Joint
  Venture                               205,914     222,699      62,363      68,199      30,601       33,465
Fund VII-Fund VIII Joint
  Venture                               191,891     170,733      65,093      50,640      23,857       18,560
Fund VI-VII-VIII Joint Venture          589,832     590,518     247,868     238,724      82,776       79,722
Fund I-II-IIOW-VI-VII
  Joint Venture                         253,968     240,232     111,010     103,548      11,887       11,088
                                     ----------  ----------  ----------  ----------    --------     --------
                                     $1,669,122  $1,626,900  $  675,408  $  669,045    $233,225     $238,543
                                     ==========  ==========  ==========  ==========    ========     ========
</TABLE>

<TABLE>
<CAPTION>
                                                                                        Partnership's Share
                                         Total Revenues            Net Income              of Net Income
                                     ----------------------  ----------------------   -----------------------
                                         Six Months Ended        Six Months Ended         Six Months Ended
                                     ----------------------  ----------------------   -----------------------
                                       June 30,    June 30,    June 30,    June 30,    June 30,     June 30,
                                         2001        2000        2001        2000        2001         2000
                                     ----------  ----------  ----------  ----------    --------     --------
<S>                                  <C>         <C>         <C>         <C>           <C>          <C>
Fund V-VI-VII Joint Venture          $  491,496  $  485,525  $  298,345  $  294,082    $124,440     $122,661
Fund VI-Fund VII Joint
    Venture                             365,561     319,541     122,997     138,530      67,895       77,976
Fund II-III-VI-VII Joint
  Venture                               416,291     444,856      91,170     138,422      44,737       67,924
Fund VII-Fund VIII Joint
  Venture                               383,535     341,412     126,855     116,851      46,494       42,827
Fund VI-VII-VIII Joint
  Venture                             1,173,864   1,179,938     394,890     506,502     131,874      169,147
Fund I-II-IIOW-VI-VII
  Joint Venture                         510,976     483,100     287,694     246,467      30,806       26,392
                                     ----------  ----------  ----------  ----------    --------     --------
                                     $3,341,723  $3,254,372  $1,321,951  $1,440,854    $446,246     $506,927
                                     ==========  ==========  ==========  ==========    ========     ========
</TABLE>

3. SUBSEQUENT EVENT

On August 7, 2001, Fund I, II, II-OW, VI and VII Joint Venture entered into
a purchase and sale agreement to sell Cherokee Commons. The contract price
exceeds the carrying value of the property. Since the transaction is subject to
a due diligence period, there are no assurances that the sale will close.

                                       9

<PAGE>

   ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   RESULTS OF OPERATIONS

   The following discussion and analysis should be read in conjunction with the
   accompanying financial statements of the Partnership and notes thereto. This
   Report contains forward-looking statements, within the meaning of Section 27A
   of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
   of 1934, including discussion and analysis of the financial condition of the
   Partnership, anticipated capital expenditures required to complete certain
   projects, amounts of cash distributions anticipated to be distributed to
   Limited Partners in the future, and certain other matters. Readers of this
   Report should be aware that there are various factors that could cause actual
   results to differ materially from any forward-looking statement made in this
   Report, which include construction costs which may exceed estimates,
   construction delays, lease-up risks, inability to obtain new tenants upon the
   expiration of existing leases, and the potential need to fund tenant
   improvements or other capital expenditures out of operating cash flow.

1. RESULTS OF OPERATIONS AND CHANGES IN FINANCIAL CONDITIONS

   General

   As of June 30, 2001, the developed properties owned by the Partnership were
   98.2% occupied, as compared to 96.9% occupied as of June 30, 2000.

   Gross revenues of the Partnership were $448,555 for the six months ended June
   30, 2001 as compared to $508,074 for the six months ended June 30, 2000. The
   decrease in revenues is attributed primarily to decreased earnings from the
   Fund VI-Fund VII Joint Venture, Fund VI-VII-VIII Joint Venture, and Fund II-
   III-VI-VII Joint Venture, primarily due to establishing $65,000 of total new
   reserves for doubtful accounts receivable at the Tanglewood Property (Fund
   VI-VII-VIII Joint Venture), Stockbridge Village III Property (Fund VI-VII
   Joint Venture), and Holcomb Bridge Property (Fund II-III-VI-VII Joint
   Venture), and increased operating expenditures of approximately $18,000 at
   the Bell South Property (Fund VI-VII-VIII Joint Venture), partially offset by
   increased rental renewal rates at the Stockbridge Village I Expansion
   Property (Fund VI-VII Joint Venture). Expenses of the Partnership decreased
   to $47,873 for the six months ended June 30, 2001, as compared to $50,509 for
   the six months ended June 30, 2000. This decrease was due to a decrease in
   legal and accounting fees.

   The Partnership's net cash flows used in operating activities increased to
   $50,388 in 2001, as compared to $47,437 for 2000, which is primarily due to
   the decrease in expenses as noted above. Net cash provided by investing
   activities decreased to $943,216 for 2001 from $996,115 in 2001, due to
   decreases in distributions received from joint ventures, as equity in income
   of joint ventures decreased during this period as noted above. Net cash used
   in financing activities decreased to $915,788 for 2001 from $930,033 for 2000
   due to decreases in cash flows generated by properties owned through joint
   ventures.

   Net income per weight average unit for Class A Limited Partners was $0.20 for
   the six months ended June 30, 2001 as compared to $0.42 for the six months
   ended June 30, 2000. Net loss per weighted average unit for Class B and
   converted Class A Limited Partners was $0 for the six months ended June 30,
   2001 as compared to $1.07 for the six months ended June 30, 2000, due to a
   change in the allocation of income as a result of the Class B partner's
   capital balances reaching zero at the end of 2000.

                                       10
<PAGE>

   Cash distributions declared per weighted average Unit for Class A Limited
   Partners were $0.44 for the six months ended June 30, 2001 as compared to
   $0.47 for the six months ended June 30, 2000. No cash distributions were made
   by the Partnership to the Limited Partners holding Class B Units or to the
   General Partner.

   The Partnership expects to continue to meet its short-term liquidity
   requirements and budget demands generally through net cash provided by
   operations which the Partnership believes will continue to be adequate to
   meet both operating requirements and distributions to limited partners.

   The Partnership recently made the decision to begin selling some of its
   properties. As the properties are sold, all proceeds will be returned to
   limited partners in accordance with the Partnership's prospectus. Management
   estimates that the fair market value of each of the properties exceeds the
   carrying value of the corresponding real estate assets; consequently, no
   impairment loss has been recorded. In the event that the net sales proceeds
   are less than the carrying value of the property sold, the Partnership would
   recognize a loss on the sale. Management is not contractually or financially
   obligated to sell any of its properties, and it is management's current
   intent to fully realize the Partnership's investment in real estate. The
   success of the Partnership's future operations and the ability to realize the
   investment in its assets will be dependent on the Partnership's ability to
   maintain rental rates, occupancy and an appropriate level of operating
   expenses in future years. Management believes that the steps that it is
   taking will enable the Partnership to realize its investment in its real
   estate assets.

                                       11
<PAGE>

                          PART II.  OTHER INFORMATION

ITEM 6 (b.)  No reports on Form 8-K were filed during the second quarter of
             2001.

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.


                                          WELLS REAL ESTATE FUND VII, L.P.
                                          (Registrant)
Dated:  August 10, 2000              By:  /s/ Leo F. Wells, III
                                          -----------------------------------
                                          Leo F. Wells, III, as Individual
                                          General Partner, and as President,
                                          and Chief Financial Officer of
                                          Wells Capital, Inc., the General
                                          Partner of Wells Partners, L.P.

                                       12