UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549

                           FORM 10-QSB

           Quarterly Report Under Section 13 or 15(d)
             of The Securities Exchange Act of 1934

           For the Quarter Ended:  September 30, 2006

               Commission file number:  000-51823


                   AEI INCOME & GROWTH FUND 26 LLC
(Exact Name of Small Business Issuer as Specified in its Charter)


      State of Delaware                    41-2173048
(State or other Jurisdiction of         (I.R.S. Employer
Incorporation or Organization)        Identification No.)


    30 East 7th Street, Suite 1300, St. Paul, Minnesota 55101
             (Address of Principal Executive Offices)

                         (651) 227-7333
                   (Issuer's telephone number)


                        Not Applicable
 (Former name, former address and former fiscal year, if changed
                       since last report)

Check  whether  the issuer (1) filed all reports required  to  be
filed by Section 13 or 15(d) of the Exchange Act during the  past
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

Indicate by check mark whether the registrant is a shell  company
(as defined in Rule 12b-2 of the Exchange Act).  Yes       No [X]

Transitional Small Business Disclosure Format:   Yes       No [X]


                 AEI INCOME & GROWTH FUND 26 LLC


                              INDEX




PART I. Financial Information

 Item 1. Balance Sheet as of September 30, 2006 and December 31, 2005

         Statements for the Periods ended September 30, 2006  and 2005:

           Income

           Cash Flows

           Changes in Members' Equity

         Notes to Financial Statements

 Item 2. Management's Discussion and Analysis

 Item 3. Controls and Procedures

PART II. Other Information

 Item 1. Legal Proceedings

 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 Item 3. Defaults Upon Senior Securities

 Item 4. Submission of Matters to a Vote of Security Holders

 Item 5. Other Information

 Item 6. Exhibits

         Signatures


<PAGE>
                 AEI INCOME & GROWTH FUND 26 LLC
                          BALANCE SHEET
            SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

                           (Unaudited)

                             ASSETS

                                                       2006          2005
CURRENT ASSETS:
  Cash and Cash Equivalents                       $   712,324    $     1,004

INVESTMENTS IN REAL ESTATE:
  Land                                              1,139,163              0
  Buildings and Equipment                           3,244,011              0
  Accumulated Depreciation                            (41,120)             0
                                                   -----------    -----------
      Net Investments in Real Estate                4,342,054              0
                                                   -----------    -----------
          Total Assets                            $ 5,054,378    $     1,004
                                                   ===========    ===========

                        LIABILITIES AND MEMBERS' EQUITY

CURRENT LIABILITIES:
  Payable to AEI Fund Management, Inc.            $    70,439    $         0
  Distributions Payable                                58,045              0
                                                   -----------    -----------
      Total Current Liabilities                       128,484              0
                                                   -----------    -----------
MEMBERS' EQUITY (DEFICIT):
  Managing Members' Equity                                (60)         1,004
  Limited Members' Equity, $10 per Unit;
   10,000,000 Units authorized;
   582,408  Units issued and outstanding in 2006    4,925,954              0
                                                   -----------    -----------
      Total Members' Equity                         4,925,894          1,004
                                                   -----------    -----------
       Total Liabilities and Members' Equity      $ 5,054,378    $     1,004
                                                   ===========    ===========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
                 AEI INCOME & GROWTH FUND 26 LLC
                       STATEMENT OF INCOME
               FOR THE PERIODS ENDED SEPTEMBER 30

                           (Unaudited)

                                 Three Months Ended       Nine Months Ended
                                9/30/06      9/30/05     9/30/06     9/30/05

INCOME:
   Rent                        $  66,699   $       0   $  109,592  $       0
   Miscellaneous Income                0           0        6,199          0
                                ---------   ---------   ----------  ---------
        Total Income              66,699           0      115,791          0
                                ---------   ---------   ----------  ---------
EXPENSES:
   LLC  Administration -
    Affiliates                    13,808           0        22,979         0
   LLC Administration
    and Property Management  -
    Unrelated  Parties             2,171           0         4,445         0
   Depreciation                   25,760           0        41,120         0
                                ---------   ---------    ---------- ---------
        Total Expenses            41,739           0        68,544         0
                                ---------   ---------    ---------- ---------
OPERATING INCOME                  24,960           0        47,247         0

OTHER INCOME:
   Interest Income                 7,102           0         7,446         0
                                ---------   ---------    ----------  --------
NET INCOME                     $  32,062   $       0    $   54,693  $      0
                                =========   =========    ==========  ========

NET INCOME ALLOCATED:
   Managing Members            $     962   $       0    $    1,641  $      0
   Limited Members                31,100           0        53,052         0
                                ---------   ---------    ----------  --------
                               $  32,062   $       0    $   54,693  $      0
                                =========   =========    ==========  ========

NET INCOME PER LLC UNIT        $     .07   $       0    $      .15  $      0
                                =========   =========    ==========  ========

Weighted  Average Units
  Outstanding                    450,428           0       349,784         0
                                =========   =========    ==========  ========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
                 AEI INCOME & GROWTH FUND 26 LLC
                     STATEMENT OF CASH FLOWS
               FOR THE PERIODS ENDED SEPTEMBER 30

                           (Unaudited)

                                                      2006          2005

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income                                   $    54,693     $       0

   Adjustments To Reconcile Net Income
   To Net Cash Provided By Operating Activities:
     Depreciation                                    41,120             0
     Increase in Payable to
        AEI Fund Management, Inc.                    70,439             0
                                                 -----------     ---------
        Total Adjustments                           111,559             0
                                                 -----------     ---------
        Net Cash Provided By
            Operating Activities                    166,252             0
                                                 -----------     ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Investments in  Real  Estate               (4,383,174)            0
                                                 -----------     ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Capital Contributions from  Managing Members           0         1,000
   Capital  Contributions from Limited Members    5,824,083             0
   Organization and Syndication Costs              (863,735)            0
   Increase in Distributions Payable                 58,045             0
   Distributions to Members                         (90,151)            0
                                                 -----------     ---------
        Net Cash Provided By
            Financing Activities                  4,928,242         1,000
                                                 -----------     ---------
NET INCREASE IN CASH
   AND CASH EQUIVALENTS                             711,320         1,000

CASH AND CASH EQUIVALENTS,  beginning of period       1,004             0
                                                 -----------     ---------
CASH AND CASH EQUIVALENTS, end of period        $   712,324     $   1,000
                                                 ===========     =========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
                 AEI INCOME & GROWTH FUND 26 LLC
             STATEMENT OF CHANGES IN MEMBERS' EQUITY
               FOR THE PERIODS ENDED SEPTEMBER 30

                           (Unaudited)


                                                                 Limited
                                                                 Member
                             Managing    Limited                  Units
                             Members     Members     Total     Outstanding


BALANCE, March 14, 2005     $     0   $        0   $        0           0

  Capital Contributions       1,000            0        1,000           0
                             -------   ----------   ----------  ----------
BALANCE, September 30, 2005 $ 1,000   $        0   $    1,000           0
                             =======   ==========   ==========  ==========


BALANCE, December 31, 2005  $ 1,004   $        0   $    1,004           0

  Capital Contributions           0    5,824,083    5,824,083   582,408.3

  Organization and
    Syndication Costs             0     (863,735)    (863,735)

  Distributions              (2,705)     (87,446)     (90,151)

  Net Income                  1,641       53,052       54,693
                             -------   ----------   ----------  ----------
BALANCE, September 30, 2006 $   (60)  $4,925,954   $4,925,894   582,408.3
                             =======   ==========   ==========  ==========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>

                 AEI INCOME & GROWTH FUND 26 LLC
                  NOTES TO FINANCIAL STATEMENTS
                       SEPTEMBER 30, 2006

                           (Unaudited)

(1)  The  condensed  statements included herein have been  prepared
     by  the  Company,  without audit, pursuant to  the  rules  and
     regulations  of  the Securities and Exchange  Commission,  and
     reflect   all  adjustments  which  are,  in  the  opinion   of
     management,  necessary to a fair statement of the  results  of
     operations for the interim period, on a basis consistent  with
     the  annual audited statements.  The adjustments made to these
     condensed   statements  consist  only  of   normal   recurring
     adjustments.   Certain information, accounting  policies,  and
     footnote    disclosures   normally   included   in   financial
     statements  prepared  in  accordance with  generally  accepted
     accounting principles have been condensed or omitted  pursuant
     to  such  rules and regulations, although the Company believes
     that  the  disclosures  are adequate to make  the  information
     presented   not  misleading.   It  is  suggested  that   these
     condensed  financial  statements be read in  conjunction  with
     the  financial  statements  and  the  summary  of  significant
     accounting  policies  and  notes  thereto  included   in   the
     Company's latest annual report on Form 10-KSB.

(2)  Organization -

     AEI  Income  & Growth Fund 26 LLC (the Company),  a  Limited
     Liability  Company, was formed on March 14, 2005 to  acquire
     and  lease commercial properties to operating tenants.   The
     Company's operations are managed by AEI Fund Management XXI,
     Inc.  (AFM),  the Managing Member.  Robert P.  Johnson,  the
     President  and sole director of AFM, serves as  the  Special
     Managing  Member.  AFM is a wholly owned subsidiary  of  AEI
     Capital  Corporation of which Mr. Johnson  is  the  majority
     shareholder.  AEI Fund Management, Inc. (AEI), an  affiliate
     of  AFM, performs the administrative and operating functions
     for the Company.

     The  terms of the offering call for a subscription price  of
     $10 per LLC Unit, payable on acceptance of the offer.  Under
     the  terms of the Operating Agreement, 10,000,000 LLC  Units
     are  available for subscription which, if fully  subscribed,
     will  result  in  contributed Limited  Members'  capital  of
     $100,000,000.  The Company commenced operations on April  3,
     2006   when  minimum  subscriptions  of  150,000  LLC  Units
     ($1,500,000)   were  accepted.   At  September   30,   2006,
     582,408.3 Units ($5,824,083) were subscribed and accepted by
     the  Company.  The Managing Members have contributed capital
     of  $1,000.   The Company shall continue until December  31,
     2055,  unless dissolved, terminated and liquidated prior  to
     that date.

     During operations, any Net Cash Flow, as defined, which  the
     Managing Members determine to distribute will be distributed
     97%  to  the Limited Members and 3% to the Managing Members.
     Distributions to Limited Members will be made  pro  rata  by
     Units.

                 AEI INCOME & GROWTH FUND 26 LLC
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)

(2)  Organization - (Continued)

     Any  Net  Proceeds  of Sale, as defined, from  the  sale  or
     financing of properties which the Managing Members determine
     to distribute will, after provisions for debts and reserves,
     be  paid  in  the following manner: (i) first,  99%  to  the
     Limited  Members  and 1% to the Managing Members  until  the
     Limited  Members  receive  an amount  equal  to:  (a)  their
     Adjusted  Capital Contribution plus (b) an amount  equal  to
     6.5%  of  their  Adjusted  Capital Contribution  per  annum,
     cumulative  but not compounded, to the extent not previously
     distributed  from Net Cash Flow; (ii) any remaining  balance
     will  be distributed 90% to the Limited Members and  10%  to
     the  Managing Members.  Distributions to the Limited Members
     will be made pro rata by Units.

     For  tax  purposes,  profits  from  operations,  other  than
     profits  attributable  to  the  sale,  exchange,  financing,
     refinancing  or  other  disposition  of  property,  will  be
     allocated 97% to the Limited Members and 3% to the  Managing
     Members.   Net losses from operations will be allocated  99%
     to the Limited Members and 1% to the Managing Members.

     For  tax purposes, profits arising from the sale, financing,
     or  other  disposition  of property  will  be  allocated  in
     accordance  with  the Operating Agreement  as  follows:  (i)
     first,  to  those  Members with deficit  balances  in  their
     capital  accounts  in an amount equal to  the  sum  of  such
     deficit  balances; (ii) second, 99% to the  Limited  Members
     and  1%  to the Managing Members until the aggregate balance
     in  the Limited Members' capital accounts equals the sum  of
     the Limited Members' Adjusted Capital Contributions plus  an
     amount equal to 6.5% of their Adjusted Capital Contributions
     per  annum, cumulative but not compounded, to the extent not
     previously  allocated;  (iii)  third,  the  balance  of  any
     remaining  gain  will then be allocated 90% to  the  Limited
     Members  and  10% to the Managing Members.  Losses  will  be
     allocated 99% to the Limited Members and 1% to the  Managing
     Members.

     The  Managing Members are not required to currently  fund  a
     deficit capital balance.  Upon liquidation of the Company or
     withdrawal  by a Managing Member, the Managing Members  will
     contribute to the Company an amount equal to the  lesser  of
     the  deficit balances in their capital accounts or 1.01%  of
     the  total capital contributions of the Limited Members over
     the amount previously contributed by the Managing Members.

(3)  Investments in Real Estate -

     During  the second quarter of 2006, the Company purchased  a
     40%  interest  in a Sports Authority (formerly Gart  Sports)
     store  in  Wichita, Kansas for $2,230,753.  The property  is
     leased  to TSA Stores, Inc. under a Lease Agreement  with  a
     remaining  primary term of 11 years and initial annual  rent
     of  $186,059.   The remaining interest in the  property  was
     purchased  by AEI Income & Growth Fund 25 LLC, an  affiliate
     of the Company.

                 AEI INCOME & GROWTH FUND 26 LLC
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)

(3)  Investments in Real Estate - (Continued)

     The  Sports  Authority  store was purchased  from  AEI  Fund
     Management  XVII, Inc. (AFMX), an affiliate of the  Managing
     Members.   In  order  to  facilitate  the  purchase  of  the
     Company's  first property, AFMX purchased the property  from
     an  unrelated third party on December 22, 2005.   The  price
     paid by the Company was equal to the price paid by AFMX plus
     the  expenses incurred to transfer ownership of the property
     to  the  Company, which were minimal.  There  was  no  other
     benefit  arising  out  of the transaction  to  the  Managing
     Members   or   their  affiliates  apart  from   compensation
     otherwise permitted by the Operating Agreement.

     On  June 1, 2006, the Company purchased a 55% interest in an
     Advance Auto Parts store in Middletown, Ohio for $1,021,461.
     The property is leased to Advance Stores Company, Inc. under
     a  Lease  Agreement with a remaining primary  term  of  13.2
     years  and  initial annual rent of $71,679.   The  remaining
     interest  in  the  property was purchased by  AEI  Income  &
     Growth Fund 24 LLC, an affiliate of the Company.

     On  September 21, 2006, the Company purchased a 37% interest
     in  an  Applebee's restaurant in Indianapolis,  Indiana  for
     $1,130,960.  The property is leased to Apple Indiana II  LLC
     under a Lease Agreement with a primary term of 20 years  and
     initial annual rent of $81,497.

     Subsequent  to September 30, 2006, the Company purchased  an
     additional  50%  interest in this property from  AFMX.   The
     Company  also expects to purchase the remaining 13% interest
     in  this  property from AFMX once there are  adequate  funds
     from  the  sale of units, and provided the Managing  Members
     conclude  that the purchase provides adequate  diversity  of
     the Company's holdings.  In order to facilitate the purchase
     of  this  property,  AFMX purchased a 63%  interest  in  the
     property  for approximately $1,893,000.  The lease  requires
     initial annual rent of $138,765 for this interest.

     Another  Applebee's  restaurant has  been  identified  as  a
     possible  acquisition  for the Company.   On  September  21,
     2006,   AFMX   purchased   an   Applebee's   restaurant   in
     Crawfordsville, Indiana for approximately $3,045,000.   This
     property  is  also leased to Apple Indiana II  LLC  under  a
     Lease  Agreement with a primary term of 20 years and initial
     annual  rent  of  $223,222. Based upon the  availability  of
     sufficient  additional  subscription proceeds,  the  Company
     anticipates  purchasing this property in whole  or  in  part
     from   AFMX.   Whether  the  Company  purchases  the  entire
     property  or only a partial interest in it will depend  upon
     several   factors  including  the  amount  of   subscription
     proceeds  raised, the time it takes to raise  the  proceeds,
     the diversification of the Company's property portfolio, and
     the   availability  of  other  properties  the  Company  may
     acquire, among other factors.

                 AEI INCOME & GROWTH FUND 26 LLC
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)

(3)  Investments in Real Estate - (Continued)

     For  a property interest purchased from AFMX, the price paid
     by  the Company will be equal to the price paid by AFMX plus
     the  expenses  incurred by it to transfer ownership  of  the
     property to the Company.  Those expenses are expected to  be
     minimal.  Any profit or loss on the property interest during
     the  period  the interest is owned by AFMX will be  paid  or
     charged  to  the  Company.  There will be no  other  benefit
     arising  out of the transactions to the Managing Members  or
     their affiliates apart from compensation otherwise permitted
     by the Operating Agreement.


 (4) Payable to AEI Fund Management, Inc. -

     AEI  Fund  Management, Inc. performs the administrative  and
     operating  functions for the Company.  The  payable  to  AEI
     Fund   Management  represents  the  balance  due  for  those
     services.    This  balance  is  non-interest   bearing   and
     unsecured  and  is  to  be  paid in  the  normal  course  of
     business.


(5)  Miscellaneous Income -

     The  Company purchased a 40% interest in a Sports  Authority
     store  in  Wichita, Kansas from an affiliate of the Managing
     Members.   During the period the property was owned  by  the
     affiliate,  the  property generated net  income  of  $6,199.
     Pursuant to the Operating Agreement, this amount was paid to
     the  Company  and is shown as Miscellaneous  Income  on  the
     Income Statement.


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS.

        The Management's Discussion and Analysis contains various
"forward  looking  statements"  within  the  meaning  of  federal
securities  laws  which  represent management's  expectations  or
beliefs  concerning future events, including statements regarding
anticipated  application of cash, expected  returns  from  rental
income,  growth  in revenue, taxation levels, the sufficiency  of
cash to meet operating expenses, rates of distribution, and other
matters.  These, and other forward looking statements made by our
managers, must be evaluated in the context of a number of factors
that   may   affect  our  financial  condition  and  results   of
operations, including the following:

    Market and economic conditions which affect the value
    of the properties we purchase and the cash from rental
    income such properties generate;

    the federal income tax consequences of rental income,
    deductions, gain on sales and other items and the
    affects of these consequences for members;

    resolution by our managers of conflicts with which they
    may be confronted;

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

    the success of our managers of locating properties with
    favorable risk return characteristics;

    the effect of tenant defaults; and

    the condition of the industries in which the tenants of
    properties purchased by the Company operate.


The Application of Critical Accounting Policies

        The  preparation  of  the Company's financial  statements
requires  management to make estimates and assumptions  that  may
affect the reported amounts of assets, liabilities, revenues  and
expenses,  and  related  disclosure  of  contingent  assets   and
liabilities. Management evaluates these estimates on  an  ongoing
basis,  including  those related to the carrying  value  of  real
estate  and  the  allocation  by AEI  Fund  Management,  Inc.  of
expenses to the Company as opposed to other funds they manage.

        The  Company will purchase properties and record them  in
the  financial  statements  at the lower  of  cost  or  estimated
realizable  value.  The Company initially records the  properties
at   cost  (including  capitalized  acquisition  expenses).   The
Company  is required to periodically evaluate the carrying  value
of  properties  to determine whether their realizable  value  has
declined.   For  properties the Company will  hold  and  operate,
management   determines  whether  impairment  has   occurred   by
comparing the property's probability-weighted cash flows  to  its
current carrying value.  For properties held for sale, management
determines  whether  impairment has  occurred  by  comparing  the
property's estimated fair value less cost to sell to its  current
carrying  value.   If  the carrying value  is  greater  than  the
realizable  value, an impairment loss is recorded to  reduce  the
carrying value of the property to its realizable value.  A change
in  these assumptions or analysis could cause material changes in
the carrying value of the properties.

        AEI  Fund Management, Inc. allocates expenses to each  of
the  funds  they manage primarily on the basis of the  number  of
hours  devoted  by their employees to each fund's affairs.   They
also  allocate  expenses at the end of each month  that  are  not
directly related to a fund's operations based upon the number  of
investors  in the fund and the fund's capitalization relative  to
other  funds they manage.  The Company reimburses these  expenses
subject  to  detailed  limitations  contained  in  the  Operating
Agreement.

        Management  of the Company has discussed the  development
and   selection  of  the  above  accounting  estimates  and   the
management  discussion  and analysis disclosures  regarding  them
with the managing member of the Company.

Results of Operations

        The  Company was organized on March 14, 2005.  From  this
date  until the initial subscription proceeds of $1,932,316  were
released  from escrow on April 3, 2006, the Company had  received
only  $1,000  of  capital  from the  Managing  Members,  had  not
conducted any business operations other than those related to the
offering and sale of Units and had not admitted any investors  as
Limited Members.


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

        For the nine months ended September 30, 2006, the Company
recognized  rental  income of $109,592,  representing  rent  from
three  properties acquired during the period.  At  September  30,
2006,  the  scheduled  annual rent for the three  properties  was
$339,235.

       The Company purchased a 40% interest in a Sports Authority
(formerly Gart Sports) store in Wichita, Kansas from an affiliate
of  the  Managing  Members.  During the period the  property  was
owned  by  the  affiliate, the property generated net  income  of
$6,199.   Pursuant to the Operating Agreement,  this  amount  was
paid  to the Company and is shown as Miscellaneous Income on  the
Income Statement.

        For the nine months ended September 30, 2006, the Company
incurred  LLC administration expenses from affiliated parties  of
$22,979.   These administration expenses include costs associated
with  the management of the properties, processing distributions,
reporting requirements and correspondence to the Limited Members.
During  the  same period, the Company incurred LLC administration
and  property  management  expenses  from  unrelated  parties  of
$4,445.   These  expenses  represent  direct  payments  to  third
parties  for legal and filing fees, direct administrative  costs,
outside audit costs, taxes, insurance and other property costs.

        For the nine months ended September 30, 2006, the Company
recognized  interest  income of $7,446 mainly  from  subscription
proceeds temporarily invested in a money market account.

        Inflation  has  had  a  minimal  effect  on  income  from
operations.   Leases  may contain rent increases,  based  on  the
increase  in  the  Consumer Price Index over a specified  period,
which  will result in an increase in rental income over the  term
of  the  leases.   In addition, leases may contain  rent  clauses
which  entitle the Company to receive additional rent  in  future
years if gross receipts for the property exceed certain specified
amounts.   Increases  in sales volumes of  the  tenants,  due  to
inflation  and  real sales growth, may result in an  increase  in
rental  income over the term of the leases.  Inflation  also  may
cause the real estate to appreciate in value.  However, inflation
and  changing prices may have an adverse impact on the  operating
margins  of  the  properties' tenants, which could  impair  their
ability  to  pay rent and subsequently reduce the Net  Cash  Flow
available for distributions.

Liquidity and Capital Resources

        The  Company's primary sources of cash are proceeds  from
the  sale  of Units, interest income, rental income and  proceeds
from  the  sale  of  property.  Its  primary  uses  of  cash  are
investment  in real properties, payment of expenses  involved  in
the sale of Units, the management of properties, the organization
and   administration  of  the  Company,  and   the   payment   of
distributions.

        The  Company  generated $166,252 of cash from  operations
during the nine months ended September 30, 2006, representing net
income of $54,693, a non-cash expense of $41,120 for depreciation
and a $70,439 increase in the payable to the Company's managers.


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

        The  major  components of the Company's  cash  flow  from
investing activities are investments in real estate and  proceeds
from  the  sale  of  real estate.  During the nine  months  ended
September 30, 2006, the Company expended $4,383,174 to invest  in
real properties (inclusive of acquisition expenses).  During  the
second quarter of 2006, the Company purchased a 40% interest in a
Sports  Authority (formerly Gart Sports) store in Wichita, Kansas
for  $2,230,753.   On June 1, 2006, the Company purchased  a  55%
interest  in an Advance Auto Parts store in Middletown, Ohio  for
$1,021,461.  On September 21, 2006, the Company purchased  a  37%
interest in an Applebee's restaurant in Indianapolis, Indiana for
$1,130,960.

        The  Sports Authority store was purchased from  AEI  Fund
Management  XVII,  Inc.  (AFMX), an  affiliate  of  the  Managing
Members.   In  order to facilitate the purchase of the  Company's
first  property,  AFMX purchased the property from  an  unrelated
third  party on December 22, 2005.  The price paid by the Company
was equal to the price paid by AFMX plus the expenses incurred to
transfer  ownership  of the property to the Company,  which  were
minimal.   There  was  no  other  benefit  arising  out  of   the
transaction  to  the Managing Members or their  affiliates  apart
from compensation otherwise permitted by the Operating Agreement.

       During the offering of Units, the Company's primary source
of  cash  flow will be from the sale of LLC Units.   The  Company
commenced  the  offering of LLC Units to  the  public  through  a
registration statement that became effective October 20, 2005 and
will  continue until October 19, 2007, unless all 10,000,000  LLC
Units are sold before then.  The registration statement indicated
that  the  Company would not be capitalized, and all subscription
funds  would  be held in escrow, until the Company  had  received
subscriptions  for  150,000  Units  ($1,500,000).   The   Company
obtained subscriptions for the 150,000 Units required for release
of  escrow  proceeds and on April 3, 2006, the  Company  accepted
subscriptions  for  193,231.6 Units  for  aggregate  proceeds  of
$1,932,316.   Through September 30, 2006, the  Company  raised  a
total  of  $5,824,083  from the sale of  582,408.3  Units.   From
subscription   proceeds,  the  Company  paid   organization   and
syndication  costs (which constitute a reduction of  capital)  of
$863,735.

        After  completion of the acquisition phase, the Company's
primary  use of cash flow is distribution and redemption payments
to   Members.    The  Company  declares  its  regular   quarterly
distributions  before  the  end of  each  quarter  and  pays  the
distribution in the first ten days after the end of each quarter.
For  the  nine  months  ended September  30,  2006,  the  Company
declared distributions of $90,151, which were distributed 97%  to
Limited Members and 3% to the Managing Members.

        Beginning  in  April 2009, the Company may acquire  Units
from  Limited  Members  who  have tendered  their  Units  to  the
Company.  Such Units may be acquired at a discount.  The  Company
will not be obligated to purchase in any year more than 2% of the
total number of Units outstanding on January 1 of such year.   In
no  event shall the Company be obligated to purchase Units if, in
the  sole discretion of the Managing Member, such purchase  would
impair the capital or operation of the Company.


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

        The  Operating Agreement requires that all proceeds  from
the  sale  of Units, subject to a reasonable reserve for  ongoing
operations, be invested or committed to investment in  properties
by  the  later  of two years after the date of the Prospectus  or
twelve  months  after  the  offering  terminates.   Although  the
Company  had no formal contractual commitments to expend  capital
at  September  30,  2006,  it had identified  two  properties  as
potential acquisitions.

       Subsequent to September 30, 2006, the Company purchased an
additional   50%  interest  in  the  Applebee's   restaurant   in
Indianapolis,  Indiana from AFMX.  The Company  also  expects  to
purchase  the remaining 13% interest in this property  from  AFMX
once  there  are  adequate funds from  the  sale  of  units,  and
provided the Managing Members conclude that the purchase provides
adequate  diversity  of  the Company's  holdings.   In  order  to
facilitate  the purchase of this property, AFMX purchased  a  63%
interest in the property for approximately $1,893,000.

        Another  Applebee's restaurant has been identified  as  a
possible  acquisition for the Company.  On  September  21,  2006,
AFMX   purchased  an  Applebee's  restaurant  in  Crawfordsville,
Indiana   for   approximately  $3,045,000.     Based   upon   the
availability of sufficient additional subscription proceeds,  the
Company anticipates purchasing this property in whole or in  part
from AFMX.  Whether the Company purchases the entire property  or
only  a  partial interest in it will depend upon several  factors
including the amount of subscription proceeds raised, the time it
takes to raise the proceeds, the diversification of the Company's
property portfolio, and the availability of other properties  the
Company may acquire, among other factors.

        For  a  property interest purchased from AFMX, the  price
paid  by the Company will be equal to the price paid by AFMX plus
the expenses incurred by it to transfer ownership of the property
to  the Company.  Those expenses are expected to be minimal.  Any
profit  or  loss on the property interest during the  period  the
interest is owned by AFMX will be paid or charged to the Company.
There will be no other benefit arising out of the transactions to
the  Managing Members or their affiliates apart from compensation
otherwise permitted by the Operating Agreement.

        Until capital is invested in properties, the Company will
remain   extremely   liquid.   After   completion   of   property
acquisitions, the Company will attempt to maintain a cash reserve
of  only  approximately  .5% of subscription  proceeds.   Because
properties  are  purchased for cash and leased  under  triple-net
leases,   this   is   considered   adequate   to   satisfy   most
contingencies.

ITEM 3.  CONTROLS AND PROCEDURES.

       (a) Evaluation of disclosure controls and procedures

        Under  the  supervision  and with  the  participation  of
management, including its President and Chief Financial  Officer,
the Managing Member of the Company evaluated the effectiveness of
the   design  and  operation  of  its  disclosure  controls   and
procedures (as defined in Rule 13a-14(c) under the Exchange Act).
Based  upon  that  evaluation, the President and Chief  Financial
Officer of the Managing Member concluded that, as of the  end  of
the  period  covered by this report, the disclosure controls  and
procedures of the Company are adequately designed to ensure  that
information required to be disclosed by us in the reports we file
or   submit  under  the  Exchange  Act  is  recorded,  processed,
summarized  and  reported, within the time periods  specified  in
applicable rules and forms.

       (b)  Changes in internal controls

        There  were no significant changes made in the  Company's
internal controls during the most recent period covered  by  this
report that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over  financial
reporting.


                   PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

        There are no material pending legal proceedings to  which
the  Company  is  a party or of which the Company's  property  is
subject.

ITEM  2.UNREGISTERED  SALES  OF  EQUITY  SECURITIES  AND  USE  OF
        PROCEEDS

        (a) During the period covered by this report, the Company
did  not sell any equity securities that are not registered under
the Securities Act of 1933.

        (b) The registration statement for the offering (No. 333-
125266) was declared effective on October 20, 2005.  The offering
commenced  on  October 20, 2005 and is ongoing.  AEI  Securities,
Inc.   (ASI)  is  the  dealer  manager  of  the  offering.    The
registration  statement  covers  10,000,000  Units   of   limited
liability  company interest at an aggregate price of up  to  $100
million.   Through  September  30, 2006,  the  Company  had  sold
582,408.3 Units for gross offering proceeds of $5,824,083.

       From gross offering proceeds, the Company paid $570,967 in
selling commissions to ASI, an affiliate of the Managing Members.
Of  this  amount, $377,725 was re-allowed by ASI to participating
broker/dealers  not  affiliated with the Managing  Members.   The
gross  offering  proceeds  were further reduced  by  underwriting
discounts of $1,564 and other organization and syndication  costs
of  $291,204  of which $139,536 was paid to AEI Fund  Management,
Inc., an affiliate of the Managing Members, for costs incurred in
connection with managing the Company's offering and organization.
From   inception  to  September  30,  2006,  the   Company   paid
commissions,   organization   and  syndication   costs   totaling
$863,735.

                   PART II - OTHER INFORMATION
                           (Continued)

ITEM  2.UNREGISTERED  SALES  OF  EQUITY  SECURITIES  AND  USE  OF
        PROCEEDS

        From  the  net  offering proceeds, the  Company  expended
$4,383,174 to acquire real estate of which $4,313,047 represented
cash  paid  to  unaffiliated sellers of real estate  and  $70,127
represented cash paid to reimburse AEI Fund Management, Inc.  for
costs  and direct expenses incurred by it in acquiring properties
on behalf of the Company.

        (c) Beginning in January 2009, pursuant to Section 7.7 of
the  Operating Agreement, each Limited Member has  the  right  to
present Units to the Company for purchase by submitting notice to
the  Managing  Member during January or July of each  year.   The
purchase  price  of the Units is equal to 80% of  the  net  asset
value  of  the Units, as of the first business day of January  or
July  of  each  year,  as determined by the  Managing  Member  in
accordance with the provisions of the Operating Agreement.  Units
tendered  to the Company during January and July are redeemed  on
April 1st and October 1st, respectively, of each year subject  to
the following limitations.  The Company will not be obligated  to
purchase  in any year more than 2% of the total number  of  Units
outstanding  on  January 1 of such year.  In no event  shall  the
Company be obligated to purchase Units if, in the sole discretion
of the Managing Member, such purchase would impair the capital or
operation  of  the Company.  During the period  covered  by  this
report, the Company did not purchase any Units.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

      None.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None

ITEM 5.OTHER INFORMATION

      None.

                   PART II - OTHER INFORMATION
                           (Continued)

ITEM 6.EXHIBITS

    10.1 Assignment and Assumption of Purchase and Sale Agreement
    dated  September  11,  2006 between  the  Company,  AEI  Fund
    Management   XVII,   Inc.  and  AEI  Fund  Management,   Inc.
    relating  to  the  Property  at 7345  E.  Washington  Street,
    Indianapolis, Indiana (incorporated by reference  to  Exhibit
    10.1 of Form 8-K filed September 26, 2006).

    10.2 Net Lease Agreement dated September 21, 2006 between the
    Company, AEI Fund Management XVII, Inc. and Apple Indiana  II
    LLC  relating  to the Property at 7345 E. Washington  Street,
    Indianapolis, Indiana (incorporated by reference  to  Exhibit
    10.2 of Form 8-K filed September 26, 2006).

    31.1 Certification  of Chief Executive  Officer  of  Managing
    Member  pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a))  and
    Section 302 of the Sarbanes-Oxley Act of 2002.

    31.2 Certification  of Chief Financial  Officer  of  Managing
    Member  pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a))  and
    Section 302 of the Sarbanes-Oxley Act of 2002.

    32 Certification  of  Chief  Executive  Officer   and   Chief
    Financial Officer of Managing Member pursuant to Section  906
    of the Sarbanes-Oxley Act of 2002.



                           SIGNATURES

        In  accordance with the requirements of the Exchange Act,
the  registrant caused this report to be signed on its behalf  by
the undersigned, thereunto duly authorized.

Dated:  November 10, 2006     AEI Income & Growth Fund 26 LLC
                              By:  AEI Fund Management XXI, Inc.
                              Its: Managing Member



                              By: /s/ Robert P Johnson
                                      Robert P. Johnson
                                      President
                                      (Principal Executive Officer)



                              By: /s/ Patrick W Keene
                                      Patrick W. Keene
                                      Chief Financial Officer
                                      (Principal Accounting Officer)