FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


             (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended March 31, 1998
                            ------------------------

                                       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
                                     0-19140


                            CNL Income Fund VII, Ltd.
             (Exact name of registrant as specified in its charter)


          Florida                         59-2963871
(State or other jurisdiction            (I.R.S. Employer
of incorporation or organiza-           Identification No.)
tion)


400 E. South Street
Orlando, Florida                               32801
----------------------------             -----------------
(Address of principal                       (Zip Code)
executive offices)


Registrant's telephone number
(including area code)                     (407) 422-1574


Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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>









                                    CONTENTS




Part I                                                        Page

  Item 1.  Financial Statements:

    Condensed Balance Sheets                                  1

    Condensed Statements of Income                            2

    Condensed Statements of Partners' Capital                 3

    Condensed Statements of Cash Flows                        4

    Notes to Condensed Financial Statements                   5

  Item 2.  Management's Discussion and Analysis
             of Financial Condition and
             Results of Operations                            6-8

Part II

  Other Information                                           9


<PAGE>



                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                            CONDENSED BALANCE SHEETS


                                             March 31,         December 31,
            ASSETS                             1998                1997
                                            -----------         -----------

Land and buildings on operating
  leases, less accumulated
  depreciation of $2,245,659
  and $2,169,570                            $15,306,774        $15,382,863
Net investment in direct financing
  leases                                      3,427,625          3,447,152
Investment in joint ventures                  3,375,579          3,393,932
Mortgage notes receivable, less
  deferred gain of $126,056 and
  $126,303                                    1,248,539          1,250,597
Cash and cash equivalents                       846,587            761,317
Receivables, less allowance for
  doubtful accounts of $34,471
  and $32,959                                    12,681             64,092
Prepaid expenses                                  6,865              4,755
Accrued rental income, less
  allowance for doubtful accounts
  of $9,845 in 1998 and 1997                  1,138,762          1,114,632
Other assets                                     60,422             60,422
                                            -----------        -----------

                                            $25,423,834        $25,479,762
                                            ===========        ===========

LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                            $     3,772        $     6,131
Escrowed real estate taxes payable                8,683              7,785
Distributions payable                           675,000            675,000
Due to related parties                           35,487             34,883
Rents paid in advance                            73,899             60,671
                                            -----------        -----------
    Total liabilities                           796,841            784,470

Minority interest                               147,356            147,514

Partners' capital                            24,479,637         24,547,778
                                            -----------        -----------

                                            $25,423,834        $25,479,762
                                            ===========        ===========



            See accompanying notes to condensed financial statements.

                                        1

<PAGE>



                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                         CONDENSED STATEMENTS OF INCOME


                                                          Quarter Ended
                                                             March 31,
                                                      1998             1997
                                                   ----------       -------
Revenues:
  Rental income from operating leases              $  492,724       $  487,282
  Earned income from direct financing
    leases                                            104,375          123,665
  Contingent rental income                              9,420            1,111
  Interest and other income                            43,990           44,969
                                                   ----------       ----------
                                                      650,509          657,027
                                                   ----------       ----------

Expenses:
  General operating and administrative                 33,112           31,726
  Professional services                                 5,281            4,908
  Real estate taxes                                        -             1,028
  State and other taxes                                 2,688            4,518
  Depreciation and amortization                        76,089           76,089
                                                   ----------       ----------
                                                      117,170          118,269
                                                   ----------       ----------

Income Before Minority Interest in
  Income of Consolidated Joint Venture,
  Equity in Earnings of Unconsolidated
  Joint Ventures and Gain on Sale of
  Land and Building                                   533,339          538,758

Minority Interest in Income of
  Consolidated Joint Venture                           (4,660)          (4,627)

Equity in Earnings of Unconsolidated
  Joint Ventures                                       77,933           41,279

Gain on Sale of Land and Building                         247              222
                                                   ----------       ----------

Net Income                                         $  606,859       $  575,632
                                                   ==========       ==========

Allocation of Net Income:
  General partners                                 $    6,069       $    5,756
  Limited partners                                    600,790          569,876
                                                   ----------       ----------

                                                   $  606,859       $  575,632
                                                   ==========       ==========

Net Income Per Limited Partner Unit                $    0.020       $    0.019
                                                   ==========       ==========

Weighted Average Number of Limited
  Partner Units Outstanding                        30,000,000       30,000,000
                                                   ==========       ==========





            See accompanying notes to condensed financial statements.

                                        2

<PAGE>



                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                    CONDENSED STATEMENTS OF PARTNERS' CAPITAL


                                     Quarter Ended              Year Ended
                                       March 31,               December 31,
                                         1998                      1997
                                     -------------             --------

General partners:
  Beginning balance                   $   181,085             $   156,785
  Net income                                6,069                  24,300
                                      -----------             -----------
                                          187,154                 181,085
                                      -----------             -----------

Limited partners:
  Beginning balance                    24,366,693              24,484,985
  Net income                              600,790               2,581,708
  Distributions ($0.023 and
    $0.090 per limited partner
    unit, respectively)                  (675,000)             (2,700,000)
                                      -----------             -----------
                                       24,292,483              24,366,693
                                      -----------             -----------

Total partners' capital               $24,479,637             $24,547,778
                                      ===========             ===========



            See accompanying notes to condensed financial statements.

                                        3

<PAGE>



                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                       CONDENSED STATEMENTS OF CASH FLOWS


                                                         Quarter Ended
                                                           March 31,
                                                      1998            1997
                                                   ----------      ----------

Increase (Decrease) in Cash and Cash
  Equivalents:

    Net Cash Provided by Operating
      Activities                                   $  749,233      $  718,025
                                                   ----------      ----------

    Cash Flows from Investing Activities:
      Investment in joint venture                          -         (617,035)
      Collections on mortgage notes
        receivable                                      2,600           2,349
      Other                                            13,255              -
                                                   ----------      ---------
          Net cash provided by (used in)
            investing activities                       15,855        (614,686)
                                                   ----------      ----------

    Cash Flows from Financing Activities:
      Distributions to limited partners              (675,000)       (675,000)
      Distributions to holder of minority
        interest                                       (4,818)         (4,946)
                                                   ----------      ----------
          Net cash used in financing
            activities                               (679,818)       (679,946)
                                                   ----------      ----------

Net Increase (Decrease) in Cash and Cash
  Equivalents                                          85,270        (576,607)

Cash and Cash Equivalents at Beginning of
  Quarter                                             761,317       1,305,429
                                                   ----------      ----------

Cash and Cash Equivalents at End of
  Quarter                                          $  846,587      $  728,822
                                                   ==========      ==========

Supplemental Schedule of Non-Cash
  Financing Activities:

    Distributions declared and unpaid
      at end of quarter                            $  675,000      $  675,000
                                                   ==========      ==========











            See accompanying notes to condensed financial statements.

                                        4

<PAGE>



                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     Quarters Ended March 31, 1998 and 1997


1.       Basis of Presentation:

         The accompanying  unaudited  condensed  financial  statements have been
         prepared in accordance  with the  instructions  to Form 10-Q and do not
         include  all  of the  information  and  note  disclosures  required  by
         generally  accepted  accounting  principles.  The financial  statements
         reflect all adjustments,  consisting of normal  recurring  adjustments,
         which are, in the opinion of management,  necessary to a fair statement
         of the results for the interim periods presented. Operating results for
         the quarter ended March 31, 1998,  may not be indicative of the results
         that may be expected for the year ending December 31, 1998.  Amounts as
         of December 31, 1997, included in the financial  statements,  have been
         derived from audited financial statements as of that date.

         These unaudited financial statements should be read in conjunction with
         the financial statements and notes thereto included in Form 10-K of CNL
         Income Fund VII, Ltd. (the  "Partnership)  for the year ended  December
         31, 1997.

         The  Partnership  accounts  for its 83 percent  interest in San Antonio
         #849 Joint Venture using the  consolidation  method.  Minority interest
         represents the minority joint venture partner's  proportionate share of
         the  equity  in  the  Partnership's  consolidated  joint  venture.  All
         significant   intercompany   accounts   and   transactions   have  been
         eliminated.



                                        5

<PAGE>



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

         CNL Income Fund VII,  Ltd.  (the  "Partnership")  is a Florida  limited
partnership  that was organized on August 18, 1989, to acquire for cash,  either
directly or through  joint  venture  arrangements,  both newly  constructed  and
existing  restaurants,  as  well  as  land  upon  which  restaurants  were to be
constructed  (the  "Properties"),  which are leased  primarily  to  operators of
national and regional  fast-food and family-style  restaurant chains. The leases
are triple-net  leases,  with the lessees generally  responsible for all repairs
and maintenance,  property taxes, insurance and utilities. As of March 31, 1998,
the  Partnership  owned 40 Properties,  including ten Properties  owned by joint
ventures in which the Partnership is a co-venturer and two Properties owned with
affiliates as tenants-in-common.

Liquidity and Capital Resources

         The  Partnership's  primary  source of capital for the  quarters  ended
March 31, 1998 and 1997, was cash from operations  (which includes cash received
from tenants,  distributions from joint ventures,  and interest and other income
received,  less cash paid for expenses).  Cash from  operations was $749,233 and
$718,025  for the  quarters  ended  March 31, 1998 and 1997,  respectively.  The
increase in cash from  operations  for the  quarter  ended  March 31,  1998,  as
compared to the quarter  ended March 31, 1997,  is primarily a result of changes
in income and expenses as described in "Results of Operations" below.

         Currently,  rental income from the Partnership's Properties is invested
in money market accounts or other short-term,  highly liquid investments pending
the  Partnership's  use of such  funds to pay  Partnership  expenses  or to make
distributions  to the partners.  At March 31, 1998, the Partnership had $846,587
invested in such short-term investments, as compared to $761,317 at December 31,
1997. The funds remaining at March 31, 1998, after payment of distributions  and
other  liabilities,  will be used to meet the Partnership's  working capital and
other needs.

         Total liabilities of the Partnership,  including distributions payable,
increased  to $796,841 at March 31,  1998,  from  $784,470 at December 31, 1997,
primarily as a result of an increase in rents paid in advance at March 31, 1998.
The general partners believe that the Partnership has sufficient cash on hand to
meet its current working capital needs.

         Based on cash from operations,  the Partnership declared  distributions
to the limited  partners of $675,000  for each of the  quarters  ended March 31,
1998 and 1997. This  represents  distributions  for each  applicable  quarter of
$0.023 per unit.  No  distributions  were made to the general  partners  for the
quarters  ended March 31, 1998 and 1997. No amounts  distributed  to the limited
partners for the quarters ended March 31, 1998 and 1997,



                                        6

<PAGE>



Liquidity and Capital Resources - Continued

are  required  to be or have  been  treated  by the  Partnership  as a return of
capital  for  purposes of  calculating  the  limited  partners'  return on their
adjusted  capital  contributions.  The  Partnership  intends to continue to make
distributions  of cash available for  distribution to the limited  partners on a
quarterly basis.

         The Partnership's  investment strategy of acquiring Properties for cash
and  leasing  them under  triple-net  leases to  operators  who  generally  meet
specified financial  standards  minimizes the Partnership's  operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.

         The general  partners have the right,  but not the obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
the operations of the Partnership.

Results of Operations

         During the  quarter  ended  March 31,  1997,  the  Partnership  and its
consolidated joint venture, San Antonio #849 Joint Venture,  owned and leased 31
wholly owned  Properties  (including  two  Properties  in Columbus,  Indiana and
Dunnellon,  Florida, which were sold in May and October 1997,  respectively) and
during the quarter ended March 31, 1998, the  Partnership  and its  consolidated
joint  venture  owned and leased 29 wholly  owned  Properties  to  operators  of
fast-food and family-style  restaurant chains. In connection  therewith,  during
the quarters ended March 31, 1998 and 1997, the Partnership and San Antonio #849
Joint Venture earned $597,099 and $610,947,  respectively, in rental income from
operating  leases and earned  income from direct  financing  leases.  Rental and
earned income  decreased during the quarter ended March 31, 1998, as compared to
the quarter  ended  March 31,  1997,  primarily  as a result of the sales of the
Properties in Columbus, Indiana and Dunnellon,  Florida in May and October 1997,
respectively.

         During the  quarters  ended  March 31, 1998 and 1997,  the  Partnership
owned  and  leased  nine  Properties  indirectly  through  other  joint  venture
arrangements.  In addition,  during the quarters  ended March 31, 1998 and 1997,
the  Partnership  owned one and two  Properties,  respectively,  indirectly with
affiliates as tenants-in-common.  In connection  therewith,  during the quarters
ended March 31,  1998 and 1997,  the  Partnership  earned  $77,933 and  $41,279,
respectively,  attributable to net income earned by these  unconsolidated  joint
ventures. The increase in net income earned by joint ventures during the quarter
ended  March 31,  1998,  as compared to the  quarter  ended March 31,  1997,  is
primarily due to the fact that in December 1997, the Partnership  reinvested the
net sales proceeds  received from the sale of two Properties in October 1997, in
a Property in Smithfield, North Carolina, and a Property in Miami, Florida, with
affiliates of the general partners as tenants-in-common.

                                        7

<PAGE>



Results of Operations - Continued

         During the quarters ended March 31, 1998 and 1997, the Partnership also
earned  $9,420 and  $1,111,  respectively,  in  contingent  rental  income.  The
increase in  contingent  rental  income is primarily  attributable  to increased
gross sales of certain  restaurant  Properties,  the leases of which require the
payment of contingent rent.

         Operating expenses,  including  depreciation and amortization  expense,
were  $117,170  and  $118,269  for the  quarters  ended March 31, 1998 and 1997,
respectively.

         As a result of the sale of the Property in Florence, South Carolina, in
August  1995,  and  recording  the  gain  using  the  installment   method,  the
Partnership  recognized a gain for financial reporting purposes of $247 and $222
for the quarters ended March 31, 1998 and 1997, respectively.



                                        8

<PAGE>



                           PART II. OTHER INFORMATION


Item 1.           Legal Proceedings.  Inapplicable.

Item 2.           Changes in Securities.  Inapplicable.

Item 3.           Defaults upon Senior Securities.  Inapplicable.

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

                  Inapplicable.

Item 5.           Other Information.  Inapplicable.

Item 6.           Exhibits and Reports on Form 8-K.

                  (a)      Exhibits - None.

                  (b)      No reports on Form 8-K were filed  during the quarter
                           ended March 31, 1998.

                                        9

<PAGE>


                                   SIGNATURES


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

         DATED this 12th day of May, 1998.


                            CNL INCOME FUND VII, LTD.

                             By:      CNL REALTY CORPORATION
                                      General Partner


                                      By:      /s/ James M. Seneff, Jr.
                                               ----------------------------
                                               JAMES M. SENEFF, JR.
                                               Chief Executive Officer
                                               (Principal Executive Officer)


                                      By:      /s/ Robert A. Bourne
                                               ----------------------------
                                               ROBERT A. BOURNE
                                               President and Treasurer
                                               (Principal Financial and
                                               Accounting Officer)