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, 2000
   --------------------------------------------------------------------------

                                       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 of                          (I.R.S. Employer
incorporation or organization)                          Identification No.)


450 South Orange Avenue
Orlando, Florida                                             32801
----------------------------------              ------------------------------
(Address of principal executive offices)                  (Zip Code)

Registrant's telephone number
(including area code)                                   (407) 540-2000
                                                ------------------------------


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



                                                                         Page

Part I.

         Item 1.    Financial Statements:

                           Condensed Balance Sheets

                           Condensed Statements of Income

                           Condensed Statements of Partners' Capital

                           Condensed Statements of Cash Flows

                           Notes to Condensed Financial Statements

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

         Item 3.    Quantitative and Qualitative Disclosures About
                           Market Risk

Part II.

         Other Information


<PAGE>



                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                             March 31,             December 31,
                                                                               2000                    1999
                                                                         ------------------     -------------------
<S> <C>
                               ASSETS

   Land and buildings on operating leases, less
       accumulated depreciation of $2,673,993 and
       $2,602,453, respectively                                               $ 13,912,794            $ 13,984,334
   Net investment in direct financing leases                                     3,248,301               3,273,155
   Investment in joint ventures                                                  4,585,517               4,605,906
   Mortgage notes receivable, less deferred gain of
       $123,841 and $124,143, respectively                                         991,979                 994,408
   Cash and cash equivalents                                                       980,677                 925,348
   Receivables, less allowance for doubtful accounts
       of $10,960 and $16,679, respectively                                          3,412                  72,644
   Prepaid expenses                                                                  6,626                  14,220
   Accrued rental income, less allowance for doubtful
       accounts of $9,845 in 2000 and 1999                                       1,232,172               1,215,696
   Other assets                                                                     60,422                  60,422
                                                                         ------------------     -------------------

                                                                              $ 25,021,900            $ 25,146,133
                                                                         ==================     ===================

                  LIABILITIES AND PARTNERS' CAPITAL

   Accounts payable                                                             $   34,865              $   96,894
   Distributions payable                                                           675,000                 675,000
   Due to related parties                                                           72,947                  59,131
   Rents paid in advance and deposits                                               71,892                  10,107
                                                                         ------------------     -------------------
       Total liabilities                                                           854,704                 841,132

   Minority interest                                                               145,274                 145,515

   Partners' capital                                                            24,021,922              24,159,486
                                                                         ------------------     -------------------

                                                                              $ 25,021,900            $ 25,146,133
                                                                         ==================     ===================


See accompanying notes to condensed financial statements.
<PAGE>


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


                                                                                        Quarter Ended
                                                                                          March 31,
                                                                                   2000               1999
                                                                               --------------    ---------------
Revenues:
    Rental income from operating leases                                           $  471,446         $  492,724
    Earned income from direct financing leases                                        99,048            101,876
    Contingent rental income                                                           5,950              1,510
    Interest and other income                                                         51,969             39,558
                                                                               --------------    ---------------
                                                                                     628,413            635,668
                                                                               --------------    ---------------

Expenses:
    General operating and administrative                                              45,434             35,336
    Professional services                                                             11,926              4,419
    State and other taxes                                                             14,430             13,055
    Depreciation                                                                      71,540             76,089
    Transaction costs                                                                 37,339             33,273
                                                                               --------------    ---------------
                                                                                     180,669            162,172
                                                                               --------------    ---------------

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                                                447,744            473,496

Minority Interest in Income of Consolidated
    Joint Venture                                                                     (4,712 )           (4,649 )

Equity in Earnings of Unconsolidated Joint Ventures                                   94,102             73,295

Gain on Sale of Land and Building                                                        302                273
                                                                               --------------    ---------------

Net Income                                                                        $  537,436         $  542,415
                                                                               ==============    ===============

Allocation of Net Income:
    General partners                                                               $   5,374          $   5,424
    Limited partners                                                                 532,062            536,991
                                                                               --------------    ---------------

                                                                                  $  537,436         $  542,415
                                                                               ==============    ===============

Net Income Per Limited Partner Unit                                                $   0.018          $   0.018
                                                                               ==============    ===============

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

See accompanying notes to condensed financial statements.
<PAGE>


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


                                                                          Quarter Ended           Year Ended
                                                                            March 31,            December 31,
                                                                               2000                  1999
                                                                        -------------------    ------------------

General partners:
    Beginning balance                                                          $   230,931            $  205,744
    Net income                                                                       5,374                25,187
                                                                        -------------------    ------------------
                                                                                   236,305               230,931
                                                                        -------------------    ------------------

Limited partners:
    Beginning balance                                                           23,928,555            24,108,052
    Net income                                                                     532,062             2,520,503
    Distributions ($0.023 and $0.090 per
       limited partner unit, respectively)                                        (675,000 )          (2,700,000 )
                                                                        -------------------    ------------------
                                                                                23,785,617            23,928,555
                                                                        -------------------    ------------------

Total partners' capital                                                       $ 24,021,922          $ 24,159,486
                                                                        ===================    ==================



See accompanying notes to condensed financial statements.
<PAGE>


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


                                                                                      Quarter Ended
                                                                                        March 31,
                                                                                 2000               1999
                                                                            ---------------    ---------------

Increase (Decrease) in Cash and Cash Equivalents

    Net Cash Provided by Operating Activities                                    $ 732,574          $ 738,569
                                                                            ---------------    ---------------

    Cash Flows from Investing Activities:
       Collections on mortgage notes receivable                                      2,708              2,878
                                                                            ---------------    ---------------
          Net cash provided by investing activities                                  2,708              2,878
                                                                            ---------------    ---------------

    Cash Flows from Financing Activities:
       Distributions to limited partners                                          (675,000 )         (675,000 )
       Distributions to holder of minority interest                                 (4,953 )           (4,910 )
                                                                            ---------------    ---------------
          Net cash used in financing activities                                   (679,953 )         (679,910 )
                                                                            ---------------    ---------------

Net Increase in Cash and Cash Equivalents                                           55,329             61,537

Cash and Cash Equivalents at Beginning of Quarter                                  925,348            856,825
                                                                            ---------------    ---------------

Cash and Cash Equivalents at End of Quarter                                      $ 980,677          $ 918,362
                                                                            ===============    ===============

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.
<PAGE>
</TABLE>



                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     Quarters Ended March 31, 2000 and 1999


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, 2000,  may not be indicative of the results
         that may be expected for the year ending December 31, 2000.  Amounts as
         of December 31, 1999, 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, 1999.

         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 partners'  proportionate share of
         the  equity  in  the  Partnership's  consolidated  joint  venture.  All
         significant   intercompany   accounts   and   transactions   have  been
         eliminated.

2.       Termination of Merger:

         On March 1, 2000,  the general  partners  and CNL  American  Properties
         Fund, Inc.  ("APF") mutually agreed to terminate the Agreement and Plan
         of  Merger  entered  into in  March  1999.  The  general  partners  are
         continuing  to evaluate  strategic  alternatives  for the  Partnership,
         including alternatives to provide liquidity to the limited partners.



<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  restaurant  chains.  The leases  generally are
triple-net leases, with the lessees responsible for all repairs and maintenance,
property taxes,  insurance and utilities.  As of March 31, 2000, the Partnership
owned 40 Properties,  which included  interests in ten Properties owned by joint
ventures in which the  Partnership is a co-venturer and three  Properties  owned
with affiliates as tenants-in-common.

Capital Resources

         The  Partnership's  primary  source of capital for the  quarters  ended
March 31, 2000 and 1999 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 $732,574 and
$738,569  for the  quarters  ended  March 31, 2000 and 1999,  respectively.  The
decrease in cash from  operations  for the  quarter  ended  March 31,  2000,  as
compared to the quarter ended March 31, 1999,  was primarily a result of changes
in the Partnership's working capital.

         Currently,  rental income from the Partnership's Properties is invested
in money market accounts or other short-term, highly liquid investments such as,
demand deposit accounts at commercial banks,  certificates of deposit, and money
market accounts with less than a 30-day maturity date, pending the Partnership's
use of such funds to pay Partnership  expenses or to make  distributions  to the
partners.  At March 31, 2000,  the  Partnership  had  $980,677  invested in such
short-term investments,  as compared to $925,348 at December 31, 1999. The funds
remaining  at  March  31,  2000,  after  payment  of  distributions   and  other
liabilities,  will be used to meet the  Partnership's  working capital and other
needs.

Short-Term Liquidity

         The Partnership's  short-term liquidity  requirements consist primarily
of the operating expenses of the Partnership.

         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.

         The Partnership  generally  distributes cash from operations  remaining
after the payment of operating  expenses of the Partnership,  to the extent that
the general partners  determine that such funds are available for  distribution.
Based on cash from  operations,  the Partnership  declared  distributions to the
limited  partners of $675,000 for each of the quarters  ended March 31, 2000 and
1999. 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, 2000 and 1999. No amounts  distributed to the limited partners for the
quarters  ended March 31, 2000 and 1999, 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.

         Total liabilities of the Partnership,  including distributions payable,
increased to $854,704 at March 31, 2000, from $841,132 at December 31, 1999. The
increase in  liabilities  was primarily a result of an increase in rents paid in
advance and  deposits at March 31, 2000,  as compared to December 31, 1999.  The
increase in liabilities was partially  offset by a decrease in accounts  payable
at March 31,  2000,  as compared  to December  31,  1999.  The general  partners
believe that the  Partnership  has  sufficient  cash on hand to meet its current
working capital needs.

Long-Term Liquidity

         The  Partnership  has no long-term  debt or other  long-term  liquidity
requirements.

Results of Operations

         During the  quarter  ended  March 31,  1999,  the  Partnership  and its
consolidated joint venture, San Antonio #849 Joint Venture,  owned and leased 29
wholly owned  Properties to operators of fast-food and  family-style  restaurant
chains (which included one Property which was sold in 1999).  During the quarter
ended March 31, 2000, the  Partnership  and San Antonio #849 Joint Venture owned
and leased 28 wholly owned properties to operators of fast-food and family-style
restaurant chains. In connection therewith,  during the quarters ended March 31,
2000 and 1999,  the  Partnership  and San  Antonio  #849  Joint  Venture  earned
$570,494 and $594,600,  respectively, in rental income from operating leases and
earned income from direct  financing  leases.  The decrease in rental and earned
income for the quarter  ended March 31, 2000,  as compared to the quarter  ended
March 31, 1999, was primarily due to the sale of the  Partnership's  Property in
Maryville,  Tennessee in June 1999.  The  Partnership  reinvested  the net sales
proceeds in a Property in  Montgomery,  Alabama,  as  tenants-in-common  with an
affiliate  of the general  partners.  Rental and earned  income are  expected to
remain at reduced amounts while equity in earnings of joint ventures is expected
to remain at increased  amounts due to the fact that the Partnership  reinvested
these  net  sales  proceeds  in a  Property  with an  affiliate  of the  general
partners, as tenants-in-common.

         During the  quarters  ended  March 31, 2000 and 1999,  the  Partnership
owned  and  leased  nine  Properties  indirectly  through  other  joint  venture
arrangements and owned three and two Properties,  respectively,  indirectly with
affiliates  of  the  general  partners  as   tenants-in-common.   In  connection
therewith,  during the quarters ended March 31, 2000 and 1999,  the  Partnership
earned $94,102 and $73,295,  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,  2000,  as compared to the quarter
ended  March  31,  1999,  was  primarily  due to the  fact  that  in  1999,  the
Partnership  reinvested the net sales proceeds it received from the 1999 sale of
a Property in  Maryville,  Tennessee  in one  Property  with an affiliate of the
general partners as tenants-in-common.

         Operating expenses,  including  depreciation expense, were $180,669 and
$162,172 for the quarters ended March 31, 2000 and 1999, 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 $302 and $273
for the quarters ended March 31, 2000 and 1999, respectively.

Termination of Merger:

         On March 1, 2000,  the general  partners  and CNL  American  Properties
Fund, Inc. ("APF") mutually agreed to terminate the Agreement and Plan of Merger
entered  into in March 1999.  The general  partners are  continuing  to evaluate
strategic  alternatives for the Partnership,  including  alternatives to provide
liquidity to the limited partners.

Dismissal of Legal Action

         As   described   in  greater   detail  in  Part  II,   Item  1  ("Legal
Proceedings"),  in 1999 two groups of  limited  partners  in several  CNL Income
Funds filed  purported  class action suits against the general  partners and APF
alleging,  among other  things,  that the general  partners had  breached  their
fiduciary  duties in  connection  with the proposed  Merger.  These actions were
later  consolidated  into  one  action.  On April  25,  2000,  the  judge in the
consolidated action issued a Stipulated Final Order of Dismissal of Consolidated
Action, dismissing the action without prejudice, with each party to bear its own
costs and attorneys' fees.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         No material  changes in the  Partnership's  market risk  occurred  from
December  31,  1999  through   March  31,  2000.   Information   regarding   the
Partnership's  market risk at December 31, 1999 is included in its Annual Report
on Form 10-K for the year ended December 31, 1999.


<PAGE>


                           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings.

         On May 11,  1999,  four  limited  partners in several CNL Income  Funds
         served a derivative and purported  class action lawsuit filed April 22,
         1999 against the general  partners and APF in the Circuit  Court of the
         Ninth  Judicial  Circuit of Orange County,  Florida,  alleging that the
         general   partners   breached  their  fiduciary   duties  and  violated
         provisions of certain of the CNL Income Fund partnership  agreements in
         connection  with  the  proposed  Merger.  The  plaintiffs  are  seeking
         unspecified  damages  and  equitable  relief.  On  July  8,  1999,  the
         plaintiffs  filed an amended  complaint  which,  in  addition to naming
         three  additional  plaintiffs,   includes  allegations  of  aiding  and
         abetting and  conspiring to breach  fiduciary  duties,  negligence  and
         breach of duty of good  faith  against  certain of the  defendants  and
         seeks additional  equitable relief. As amended, the caption of the case
         is Jon Hale,  Mary J. Hewitt,  Charles A.  Hewitt,  Gretchen M. Hewitt,
         Bernard J. Schulte, Edward M. and Margaret Berol Trust, and Vicky Berol
         v. James M. Seneff, Jr., Robert A. Bourne, CNL Realty Corporation,  and
         CNL American Properties Fund, Inc., Case No. CIO-99-0003561.

         On June 22, 1999, a limited  partner of several CNL Income Funds served
         a purported  class  action  lawsuit  filed  April 29, 1999  against the
         general  partners and APF, Ira Gaines,  individually and on behalf of a
         class of persons similarly  situated,  v. CNL American Properties Fund,
         Inc., James M. Seneff,  Jr., Robert A. Bourne, CNL Realty  Corporation,
         CNL Fund Advisors,  Inc., CNL Financial Corporation a/k/a CNL Financial
         Corp.,  CNL  Financial  Services,  Inc. and CNL Group,  Inc.,  Case NO.
         CIO-99-3796,  in the  Circuit  Court of the Ninth  Judicial  Circuit of
         Orange County,  Florida,  alleging that the general  partners  breached
         their  fiduciary  duties and that APF aided and abetted their breach of
         fiduciary duties in connection with the proposed Merger.  The plaintiff
         is seeking unspecified damages and equitable relief.

         On  September  23,  1999,  Judge  Lawrence  Kirkwood  entered  an order
         consolidating  the two cases under the caption In re: CNL Income  Funds
         Litigation, Case No. 99-3561. Pursuant to this order, the plaintiffs in
         these cases filed a consolidated  and amended  complaint on November 8,
         1999. On December 22, 1999,  the general  partners and CNL Group,  Inc.
         filed  motions to dismiss and motions to strike.  On December 28, 1999,
         APF and CNL Fund Advisors,  Inc. filed motions to dismiss.  On March 6,
         2000,  all of the  defendants  filed a Joint  Notice of Filing Form 8-K
         Reports and Suggestion of Mootness.

         On April 25, 2000,  Judge Kirkwood  issued a Stipulated  Final Order of
         Dismissal  of  Consolidated  Action,   dismissing  the  action  without
         prejudice, with each party to bear its own costs and attorneys' fees.

Item 2.  Changes in Securities.  Inapplicable.

Item 3.  Default 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

         3.1         Affidavit and  Certificate  of Limited  Partnership  of CNL
                     Income  Fund  VII,   Ltd.   (Included  as  Exhibit  4.1  to
                     Registration  Statement  No.  33-31482  on  Form  S-11  and
                     incorporated herein by reference.)

         4.1         Affidavit and  Certificate  of Limited  Partnership  of CNL
                     Income  Fund  VII,   Ltd.   (Included  as  Exhibit  4.1  to
                     Registration  Statement  No.  33-31482  on  Form  S-11  and
                     incorporated herein by reference.)

         4.2         Amended and Restated  Agreement of Limited  Partnership  of
                     CNL Income Fund VII, Ltd.  (Included as Exhibit 4.2 to Form
                     10-K filed with the Securities  and Exchange  Commission on
                     April 1, 1996, and incorporated herein by reference.)

         10.1        Management  Agreement between CNL Income Fund VII, Ltd. and
                     CNL  Investment  Company  (Included as Exhibit 10.1 to Form
                     10-K filed with the Securities  and Exchange  Commission on
                     April 1, 1996, and incorporated herein by reference.)

         10.2        Assignment  of  Management  Agreement  from CNL  Investment
                     Company to CNL Income  Fund  Advisors,  Inc.  (Included  as
                     Exhibit  10.2 to Form 10-K  filed with the  Securities  and
                     Exchange  Commission  on March 30, 1995,  and  incorporated
                     herein by reference.)

         10.3        Assignment  of  Management  Agreement  from CNL Income Fund
                     Advisors,  Inc. to CNL Fund  Advisors,  Inc.  (Included  as
                     Exhibit  10.3 to Form 10-K  filed with the  Securities  and
                     Exchange  Commission  on April 1,  1996,  and  incorporated
                     herein by reference.)

         27          Financial Data Schedule (Filed herewith.)


(b)      Reports on Form 8-K

         A Current Report on Form 8-K dated February 23, 2000 was filed on March
         1, 2000,  describing  the  termination  of the  proposed  merger of the
         Partnership with and into a subsidiary of CNL American Properties Fund,
         Inc.



<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 9th day of May, 2000


                                   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)