FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT
                          UNDER SECTION 13 OR 15(D)

[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
     1934 [Fee Required]
                 For the fiscal year ended December 31, 1996
                                      or
[  ]Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
    of 1934 [No Fee Required]

                For the transition period.........to.........

                        Commission file number 0-13530

                   DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
                (Name of small business issuer in its charter)

       Delaware                                              62-1181565
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification No.)

One Insignia Financial Plaza, P.O. Box 1089
    Greenville, South Carolina                                29602
(Address of principal executive offices)                    (Zip Code)

                   Issuer's telephone number (864) 239-1000

        Securities registered under Section 12(b) of the Exchange Act:

                                     None

        Securities registered under Section 12(g) of the Exchange Act:

                    Units of Limited Partnership Interest
                               (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year:  $2,998,000

State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1996:  Market value information for the
Registrant's partnership interests is not available.  Should a trading market
develop for these interests, it is management's belief that such trading would
not exceed $25,000,000.

                     DOCUMENTS INCORPORATED BY REFERENCE
1.  Portions of the Prospectus of Registrant dated November 16, 1983 (included
in Registration Statement, No. 2-84436 of Registrant) are incorporated by
reference into Parts I and III.
                                    PART I

ITEM 1.   DESCRIPTION OF BUSINESS

  Davidson Diversified Real Estate I, L.P. (the "Registrant" or "Partnership")
is a Delaware limited partnership organized in January 1983. The general
partners of the Registrant are Davidson Diversified Properties, Inc., a
Tennessee corporation ("Managing General Partner"); Diversified Equities,
Limited, a Tennessee limited partnership ("Associate General Partner"); and
David W. Talley ("Individual General Partner") (collectively, the "General
Partners").

  The offering of the Registrant's limited partnership units ("Units")
commenced on November 16, 1983, and terminated on September 14, 1984.  The
Registrant received gross proceeds from the offering of $15,008,000 and net
proceeds of $13,507,200.

  The Registrant's primary business is to acquire, own, operate and ultimately
dispose of existing income-producing residential real properties.  Industry
segment information is not relevant.  The Registrant does not engage in any
foreign operations nor derive any income from foreign sources.

  All of the net proceeds of the offering were invested in the Registrant's six
properties, four of which have since been sold or foreclosed upon.  See "Item 2.
Description of Properties," below for a description of the Registrant's
remaining properties.

  The Registrant receives income from its properties and is responsible for
operating expenses, capital improvements and debt service payments under
mortgage obligations secured by the properties.  The Registrant financed its
properties primarily through non-recourse debt.  Therefore, in the event of
default, the lender can generally only look to the subject property for recovery
of amounts due.

  Both the income and expenses of operating the properties owned by the
Registrant are subject to factors outside of the Registrant's control, such as
over-supply of similar properties resulting from over-building, increases in
unemployment or population shifts, reduced availability of permanent mortgage
funds, changes in zoning laws, or changes in patterns or needs of users.  In
addition, there are risks inherent in owning and operating residential
properties because such properties are susceptible to the impact of economic and
other conditions outside of the control of the Registrant.

  At this time, it appears that the investment objective of capital growth will
not be attained.  In addition, unless there is significant improvement in the
performance of the Registrant's properties and the markets in which such
properties are located, investors may not receive a return of a portion of their
initial capital contributions.

  For the year ended December 31, 1996, the Registrant's properties accounted
for, in the aggregate, in excess of 99% of the Registrant's gross revenues.
Each of the properties was acquired prior to December 31, 1984.

Competition

  The real estate business is highly competitive.  The Registrant's properties
are subject to competition from similar properties in the vicinity in which each
property is located.  The Partnership is not a significant factor in its
industry.  In addition, various limited partnerships have been formed by the
General Partners and/or their affiliates to engage in businesses which may be
competitive with the Registrant.

Employees

  The Registrant has no employees.  Management and administrative services are
performed by Davidson Diversified Properties, Inc., the Managing General
Partner, and by affiliates of Insignia Financial Group, Inc. ("Insignia"), an
affiliate of the Managing General Partner.  See "Item 12. Certain Relationships
and Related Transactions" for further discussion of transactions with affiliates
during 1996 and 1995.

ITEM 2.  DESCRIPTION OF PROPERTIES

  The following table sets forth the Registrant's investments in properties:

                          Date of
Property                  Purchase     Type of Ownership             Use

Versailles on the Lake    04/05/84  Fee ownership subject       Apartment
                                    to first and second         156 units
                                    mortgages.

Ashley Woods Apts.        07/31/84  Fee ownership subject       Apartment
                                    to first mortgage           352 units

SCHEDULE OF PROPERTIES:
(dollar amounts in thousands)


                          Gross
                        Carrying    Accumulated     Useful              Federal
Property                  Value    Depreciation      Life     Method   Tax Basis

Versailles on the Lake   $ 4,319     $2,162        5-25 yrs    S/L      $ 1,281
Ashley Woods               8,375      3,949        5-25 yrs    S/L        3,112
                         $12,694     $6,111                             $ 4,393


See "Note A" of the Notes to Consolidated Financial Statements included in "Item
7" for a description of the Partnership's depreciation policy.

SCHEDULE OF MORTGAGES:
(dollar amounts in thousands)


                   Principal                                      Principal
                   Balance At     Stated                           Balance
                  December 31,   Interest     Period    Maturity    Due At
Property              1996         Rate     Amortized     Date     Maturity

Ashley Woods
  1st mortgage     $5,976          10.0%      20 yrs    07/01/00    $5,823

Versailles on 
  the Lake
  1st mortgage      2,605          7.6%     21.42 yrs   11/15/02     2,071
  2nd mortgage         88          7.6%        (1)      11/15/02        88
                    8,669
Less unamortized
  discounts          (132)

       Total       $8,537



1) Interest only payments.

SCHEDULE OF RENTAL RATES AND OCCUPANCY:
 (dollar amounts in thousands)


                                   Average Annual                 Average
                                    Rental Rates                 Occupancy
                                     (per unit)
Property                        1996           1995           1996         1995

Ashley Woods                  $6,143         $5,961            92%          94%

Versailles on the Lake         5,696          5,509            94%          94%


  As noted under "Item 1. Description of Business," the real estate industry is
highly competitive.  All of the properties of the Partnership are subject to
competition from other residential apartment complexes in the area.  The
Managing General Partner believes that all of the properties are adequately
insured.  The multi-family residential properties' lease terms are for one year
or less.  No residential tenant leases 10% or more of the available space.

SCHEDULE OF REAL ESTATE TAXES AND RATES:
(dollar amounts in thousands)


                                      1996          1996
                                     Taxes          Rate

  Ashley Woods                        $154         4.88%
  Versailles on the Lake                88         8.79%


ITEM 3.   LEGAL PROCEEDINGS

  The Registrant is unaware of any pending or outstanding litigation that is
not of a routine nature.  The General Partner of the Registrant believes that
all such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial condition or operations of the
Partnership.


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

  During the fourth quarter of the fiscal year ended December 31, 1996, no
matters were submitted to a vote of Unit holders through the solicitation of
proxies or otherwise.


                                    PART II

ITEM 5.   MARKET FOR PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS

  There is no established market for the Units and it is not anticipated that
any will exist in the foreseeable future.  As of March 1997, there were
approximately 1,136 holders of record owning an aggregate of 751.59 Units.

  Distributions to partners for the years ended December 31, 1996 and 1995,
were $403,000 and $154,000 respectively.

  Pursuant to the terms of the Partnership Agreement, there are restrictions on
the ability of the Limited Partners to transfer their Units.  In all cases, the
General Partners must consent to any transfer.

  The Revenue Act of 1987 contained provisions which have an adverse impact on
investors in "publicly traded partnerships."  Accordingly, the General Partners
have established a policy of imposing limited restrictions on the
transferability of the Units in secondary market transactions.  Implementation
of this policy should prevent a public trading market from developing and may
impact the ability of an investor to liquidate his investment quickly.  It is
expected that such policy will remain in effect until such time, if ever, as
further clarification of the Revenue Act of 1987 may permit the Registrant to
lessen the scope of the restrictions.

   There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Registrant's Partnership Agreement.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS

    The Partnership realized a net loss of $49,000 for the year ended December
31, 1996, compared to net income of $23,000 for the year ended December 31,
1995.  The net loss for the year ended December 31, 1996, is primarily due to
increases in operating and depreciation expenses.  Operating expenses increased
due to increased advertising and commissions for tenant referrals at Ashley
Woods Apartments, and maintenance salary increases at both properties due to
the hiring of additional maintenance technicians in late 1995.  Depreciation
expense increased due to approximately $318,000 and $230,000 of property
improvements completed in 1996 and 1995, respectively.  Mitigating these
expense increases were increased rental revenues generated by increases in
rental rates at both properties. Included in maintenance expense for 1996 is
$87,000 of major repairs and maintenance comprised of exterior building
renovations, parking lot rehabilitations and major landscaping.

   The Managing General Partner continues to monitor the rental market
environment in each location of its apartment properties to assess the
feasibility of increasing rents and maintaining  or increasing occupancy levels
to protect the Partnership from increases in expenses.  The Managing General
Partner expects to be able, at a minimum, to continue protecting the
Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level.  However,
rental concessions and rental reductions needed to offset softening market
conditions could affect the ability to sustain this plan.

LIQUIDITY

    At December 31, 1996, the Partnership held unrestricted cash of $637,000
compared to $868,000 at December 31, 1995.  Net cash provided by operations
decreased primarily due to the increased operating expenses discussed above.
Net cash used in investing activities decreased due to increased receipts from
restricted escrows offset by an increase in property improvements and
replacements.  Net cash used in financing activities increased due to greater
distributions to partners during 1996 compared to 1995.

  The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the various properties to adequately maintain the
physical assets as well as future maturing mortgage obligations and related
refinancing expenses.  Such assets are currently thought to be sufficient for
any near-term needs of the Partnership.  The Partnership made distributions to
partners of approximately $403,000 and $154,000 during 1996 and 1995,
respectively.  Future cash distributions will depend on the levels of net cash
generated from operations, refinancings, and property sales.

ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS


DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

LIST OF CONSOLIDATED FINANCIAL STATEMENTS




      Report of Independent Auditors

      Consolidated Balance Sheet - December 31, 1996

      Consolidated Statements of Operations - Years ended December 31, 1996
      and 1995

      Consolidated Statements of Changes in Partners' Deficit - Years ended
      December 31, 1996 and 1995

      Consolidated Statements of Cash Flows - Years ended December 31, 1996
      and 1995

      Notes to Consolidated Financial Statements






                 Report of Ernst & Young LLP, Independent Auditors



The Partners
Davidson Diversified Real Estate I, L.P.


We have audited the accompanying consolidated balance sheet of Davidson
Diversified Real Estate I, L.P. (A Limited Partnership) as of December 31, 1996,
and the related consolidated statements of operations, changes in partners'
deficit and cash flows for each of the two years in the period ended
December 31, 1996.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Davidson
Diversified Real Estate I, L.P. (A Limited Partnership) as of December 31, 1996,
and the consolidated results of its operations and its cash flows for each of
the two years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.




                                        ERNST & YOUNG LLP


Greenville, South Carolina
February 5, 1997
                      DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                             CONSOLIDATED BALANCE SHEET

                                 December 31, 1996

                        (in thousands, except unit data)
<TABLE>
<CAPTION>

<S>                                                      <C>            <C>
Assets
  Cash and cash equivalents:
    Unrestricted                                                         $   637
    Restricted-tenant security deposits                                       91
  Accounts receivable                                                         11
  Escrows for taxes and insurance                                            137
  Restricted escrows                                                         229
  Other assets                                                               203
  Investment properties (Notes A, C and F):
    Land                                                  $ 1,072
    Buildings and related personal property                11,622
                                                           12,694
    Less accumulated depreciation                          (6,111)         6,583

                                                                         $ 7,891

Liabilities and Partners' Deficit

Liabilities
  Accounts payable                                                       $    45
  Tenant security deposits                                                    91
  Accrued taxes                                                              241
  Other liabilities                                                          137
  Due to affiliates (Note B)                                                 321
  Mortgage notes payable (Note C)                                          8,537

Partners' Deficit
  General partners                                        $   (95)
  Limited partners (751.59 units
    issued and outstanding)                                (1,386)        (1,481)

                                                                         $ 7,891
<FN>  
          See Accompanying Notes to Consolidated Financial Statements
</TABLE>

                       DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                        CONSOLIDATED STATEMENTS OF OPERATIONS

                        (in thousands, except unit data)


                                                        Years Ended December 31,
                                                          1996             1995
Revenues:
  Rental income                                           $ 2,773         $2,731
  Other income                                                225            225
       Total revenues                                       2,998          2,956

Expenses:
  Operating                                                   898            826
  General and administrative                                  129            119
  Maintenance                                                 381            397
  Depreciation                                                532            487
  Interest                                                    871            878
  Property taxes                                              236            226
       Total expenses                                       3,047          2,933

  Net (loss) income (Note D)                              $   (49)        $   23

Net (loss) income allocated to general partners (5%)      $    (2)        $    1
Net (loss) income allocated to limited partners (95%)         (47)            22

                                                          $   (49)        $   23

Net (loss) income per limited partnership unit            $(62.53)        $28.65

          See Accompanying Notes to Consolidated Financial Statements


                          DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                  CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT

                                (in thousands, except unit data)
<TABLE>
<CAPTION>
                                 Limited
                               Partnership    General       Limited
                                  Units       Partners      Partners        Total
<S>                              <C>         <C>           <C>            <C>
Original capital contributions    751.84      $     1       $ 15,008       $15,009

Partners' deficit at
  December 31, 1994               751.84      $   (66)      $   (832)      $  (898)

Distributions to partners             --           (8)          (146)         (154)

Abandonment of limited
  partnership units                 (.25)          --             --            --

Net income for the year ended
  December 31, 1995                   --            1             22            23

Partners' deficit at
  December 31, 1995               751.59          (73)          (956)       (1,029)

Distributions to partners             --          (20)          (383)         (403)

Net loss for the year ended
   December 31, 1996                  --           (2)           (47)          (49)

Partners' deficit at
   December 31, 1996              751.59      $   (95)      $ (1,386)      $(1,481)
<FN>
                See Accompanying Notes to Consolidated Financial Statements
</TABLE>

                     DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (in thousands)
<TABLE>
<CAPTION>
                                                        Years Ended December 31,
                                                            1996           1995
<S>                                                      <C>             <C>
Cash flows from operating activities:
  Net (loss) income                                       $ (49)          $   23
  Adjustments to reconcile net (loss) income to
    net cash provided by operating activities:
    Depreciation                                            532              487
    Amortization of discounts and loan fees                  63               62
    Change in accounts:
      Restricted cash                                        (4)              (1)
      Accounts receivable                                     2                2
      Escrows for taxes and insurance                        19              (14)
      Other assets                                           (1)               1
      Accounts payable                                       (1)             (16)
      Tenant security deposit liabilities                     5               (1)
      Accrued taxes                                          10              (10)
      Other liabilities                                     (46)              68

         Net cash provided by operating
            activities                                      530              601

Cash flows from investing activities:
  Property improvements and replacements                   (318)            (230)
  Deposits to restricted escrows                            (78)             (75)
  Receipts from restricted escrows                          143               12

         Net cash used in investing activities             (253)            (293)

Cash flows from financing activities:
  Payments on mortgage notes payable                       (105)             (96)
  Distributions to partners                                (403)            (154)

         Net cash used in financing activities             (508)            (250)

Net (decrease) increase in cash and cash equivalents       (231)              58

Cash and cash equivalents at beginning of year              868              810

Cash and cash equivalents at end of year                  $ 637           $  868

Supplemental disclosure of cash flow information:
  Cash paid for interest                                  $ 807           $  816
<FN>
           See Accompanying Notes to Consolidated Financial Statements
</TABLE>

NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Davidson Diversified Real Estate I, L.P. (the "Partnership") is a Delaware
limited partnership organized on January 14, 1983, to acquire and operate
residential real estate properties.  The Partnership's Managing General Partner
is Davidson Diversified Properties, Inc., an affiliate of Insignia Financial
Group, Inc.  As of December 31, 1996, the Partnership operates two residential
properties located in Cincinnati, Ohio and Ft. Wayne, Indiana.

PRINCIPLES OF CONSOLIDATION

The financial statements include all the accounts of the Partnership and a 99.9%
owned partnership.  All significant inter-partnership balances have been
eliminated.

ALLOCATIONS TO PARTNERS

Net earnings (loss) of the Partnership and taxable income (loss) are allocated
95% to the limited partners and 5% to the general partners.  Distributions of
available cash (cash flow) are allocated among the limited partners and the
general partners in accordance with the agreement of limited partnership.

Allocation of net income for tax purposes, arising from the occurrence of a sale
or refinancing shall be allocated as follows:

  First, an amount equal to the aggregate deficit in the capital accounts of
  the General and Limited Partners having deficits in their capital accounts
  shall be allocated to each such partner in the same ratio as the deficit such
  partner's capital account bears to the aggregate of all such partners'
  deficits.

  Second, to the Limited Partners in an amount equal to the cash distributed to
  them from a sale or refinancing.

  Third, the remainder, if any, five percent (5%) to the General Partners and
  ninety-  five percent (95%) to the Limited Partners.

Distributions of cash from sales or refinancings shall be distributed in the
following order of priority:

  First, to the Limited Partners, an amount which when added to all prior
  distributions of cash from sales or refinancings shall equal their original
  invested capital, plus an amount which, when added to all prior distributions
  to the Limited Partners (excluding distributions which are deducted in the
  calculation of adjusted invested capital), will equal 8% per annum cumulative
  noncompounded on their adjusted invested capital, commencing the last day of
  the calendar quarter in which each Limited Partner is admitted to the
  Partnership through the date of payment.

  Second, to an affiliate of the general partners, an amount equal to its
  subordinated real estate commission, which fee is equal to the lesser of (i)
  3% of the gross sales price of a property or (ii) one-half of the competitive
  commission, as defined, but may only be paid after the Limited Partners have
  received their priority distributions as discussed in the previous paragraph.

  Third, 85% of the remaining cash from sales or refinancings to the Limited
  Partners and 15% of the  remaining cash from sales or refinancings to the
  General Partners.

ABANDONED UNITS

During 1995, the number of limited partnership units decreased by .25 units due
to limited partners abandoning their units.  In abandoning his or her
partnership units, a limited partner relinquishes all right, title and interest
in the Partnership as of the date of abandonment.

DEPRECIATION

Depreciation is provided by the straight-line method over the estimated lives of
the investment properties and related personal property.  For Federal income tax
purposes, the accelerated cost recovery method is used (1) for real property
over 18 years for additions after March 15, 1984, and before May 9, 1985, and 19
years for additions after May 8, 1985, and before January 1, 1987, and (2) for
personal property over 5 years for additions prior to January 1, 1987.  As a
result of the Tax Reform Act of 1986, for additions after December 31, 1986, the
modified accelerated cost recovery method is used for depreciation of (1) real
property additions over 27 1/2 years, and (2) personal property additions over 7
years.

INVESTMENT PROPERTIES

During 1995, the Partnership adopted "FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
which requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows are not sufficient to recover the assets' carrying amount.  The impairment
loss is measured by comparing the fair value of the asset to its carrying
amount.  The adoption of "FASB No. 121" did not have a material effect on the
Partnership's financial statements.

CASH AND CASH EQUIVALENTS

The Partnership considers unrestricted cash and certificates of deposit with
original maturities of three months or less to be cash and cash equivalents.  At
certain times, the amount of cash deposited at a bank may exceed the limit on
insured deposits.

RESTRICTED CASH - TENANT SECURITY DEPOSITS

The Partnership requires security deposits from all apartment lessees for the
duration of the lease and considers the deposits to be restricted cash.
Deposits are refunded when the tenant vacates the apartment if there has been no
damage to the unit.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

ADVERTISING

The Partnership expenses the costs of advertising as incurred.  Advertising
expense, included in operating expenses, was $39,000 and $30,000 for the years
ended December 31, 1996 and 1995, respectively.

RESTRICTED ESCROWS

1) RESERVE ACCOUNT

A general Reserve Account of $156,000 was established in 1992 from the REMIC
refinancing proceeds for the refinanced property to cover necessary repairs and
replacements of existing improvements, debt service, out-of-pocket expenses
incurred for ordinary and necessary administrative tasks, and payment of real
property taxes and insurance premiums.  The Partnership was required to deposit
net operating income (as defined in the mortgage note) from the refinanced
property to the reserve account until the reserve account equalled $1,000 per
apartment unit or $156,000 in total.  At December 31, 1996, this reserve
totalled approximately $159,000.

2) REPLACEMENT RESERVE

A replacement reserve account has been established with the mortgagee for Ashley
Woods, and these funds will be used, as needed, to make necessary repairs and
replacements.  At December 31, 1996, this reserve totalled approximately
$70,000.

LOAN COSTS

Loan costs of $182,000, net of accumulated amortization of $259,000 are being
amortized on a straight-line basis over the term of the respective loans.  The
amortization expense is included in interest expense.

LEASES

The Partnership generally leases apartment units for twelve-month terms or less.

FAIR VALUE

In 1995, the Partnership implemented Statement of "Financial Accounting
Standards No. 107, Disclosure about Fair Value of Financial Instruments," which
requires disclosure of fair value information about financial instruments for
which it is practicable to estimate that value.  The Partnership estimates the
fair value of its fixed rate mortgages by discounted cash flow analysis, based
on estimated borrowing rates currently available to the Partnership.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1995 balances to conform to the
1996 presentation.

NOTE B - DUE TO AFFILIATES

The Partnership is liable to a company affiliated with the Managing General
Partner through common ownership for real estate commissions in the amounts of
$125,000 for Revere Village and $196,000 for Essex which were sold in previous
years.  Payment of the commissions will not be made to the affiliated company
until after payment to the limited partners of their original invested capital,
plus 8% per annum cumulative non-compounded on their adjusted invested capital
commencing on the last day of the calendar quarter in which each limited partner
was admitted to the Partnership through the date of payment.

NOTE C - MORTGAGE NOTES PAYABLE

The principal terms of mortgage notes payable are as follows (dollar amounts in
thousands):

<TABLE>
<aption>
                        Principal       Monthly                          Principal
                        Balance At      Payment    Stated                 Balance
                        December 31,   Including  Interest   Maturity      Due At
Property                   1996         Interest    Rate       Date       Maturity
<S>                      <C>            <C>        <C>      <C>          <C>
Ashley Woods              $5,976         $  53      10.0%    07/01/00     $5,823

Versailles on the Lake
 1st mortgage              2,605            22       7.6%    11/15/02      2,071
 2nd mortgage                 88             1       7.6%    11/15/02         88
                           8,669         $  76
Less unamortized
 discounts                  (132)

    Totals                $8,537
</TABLE>


The above non-recourse mortgages are secured by the related property and
improvements of the Partnership and by pledge of revenues from the apartment
properties.  Certain of the notes require prepayment penalties if repaid prior
to maturity and prohibit resale of the properties subject to existing
indebtedness.

The Partnership exercised an interest rate buy-down option for Versailles on the
Lake reducing the stated rate from 8.76% to 7.60% during 1992.  The fee for the
interest rate reduction was $205,201 and is being amortized as a loan discount
using the interest method over the term of the loans.  The discount fee is
reflected as a reduction of the mortgage notes payable and increases the
effective rate of the debt to 8.76%.

The estimated fair value of the Partnership's aggregate debt is approximately
$9,033,000.  This value represents a general approximation of possible value and
is not necessarily indicative of the amounts the Partnership may pay in actual
market transactions.

Scheduled principal payments of mortgage notes payable subsequent to December
31, 1996, are as follows:



       Years Ending December 31,
            1997                             $  114
            1998                                124
            1999                                135
            2000                              5,943
            2001                                102
            Thereafter                        2,251
                                             $8,669


NOTE D - INCOME TAXES

The Partnership received a ruling from the Internal Revenue Service that it is
to be classified as a partnership for Federal income tax purposes.  Accordingly,
no provision for income taxes is made in the financial statements of the
Partnership. Taxable income or loss of the Partnership is reported in the income
tax returns of its partners.

Differences between the net (loss) income as reported and Federal taxable (loss)
income result primarily from (1) amortization of present value discounts, (2)
depreciation over different methods and lives and on differing cost bases of
apartment properties, and (3) change in rental income received in advance.  The
following is a reconciliation of reported net (loss) income and Federal taxable
(loss) income (in thousands, except per unit data):



                                          1996              1995

Net (loss) income as reported          $    (49)          $     23
Add (deduct)
   Depreciation differences                 (55)               (67)
   Unearned income                          (16)                76
   Miscellaneous                            (35)               (11)

Federal taxable (loss) income          $   (155)          $     21

Federal taxable (loss) income
   per limited partnership unit        $(195.92)          $  26.95

The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities at December 31, 1996 (in
thousands):


     Net deficit as reported                               $(1,481)
     Differences in basis of assets and liabilities:
      Buildings and Land                                       137
      Accumulated depreciation                              (2,328)
      Basis difference in lower tier partnership               375
      Other                                                     86
     Net deficit - Federal tax basis                       $(3,211)


NOTE E - TRANSACTIONS WITH AFFILIATED PARTIES

The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities.  The Partnership Agreement provides for payments to
affiliates for property management services based on a percentage of revenue and
for reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following payments were paid to affiliates of the Managing
General Partner during each of the years ended December 31, 1996 and 1995 (in
thousands):
                                                         

                                                    1996          1995
   
     Property management fees                       $149          $147
     Reimbursement for services of affiliates         87            88

In addition, affiliates of the Managing General Partner were paid approximately
$5,000 and $9,000 during 1996 and 1995, respectively, for construction oversight
costs incurred in conjunction with the Partnership's capital improvement and
major repair projects.

The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the Managing General Partner.  An affiliate of the
Managing General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which was later acquired by the
agent who placed the current year's master policy.  The current agent assumed
the financial obligations to the affiliate of the Managing General Partner who
receives payments on these obligations from the agent.  The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
Managing General Partner by virtue of the agent's obligations is not
significant.

NOTE F - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION
(dollar amounts in thousands)


                                            Initial Cost
                                            To Partnership

                                                  Buildings          Cost
                                                  and Related     Capitalized
                                                   Personal      Subsequent to
 Description               Encumbrances     Land    Property       Acquisition

Versailles on the Lake
   Apartments
   Fort Wayne, Indiana    $2,693        $  191      $3,847           $  281

Ashley Woods Apartments
   Cincinnati, Ohio        5,976           881       5,815            1,679

      Totals              $8,669        $1,072      $9,662           $1,960


<TABLE>
<CAPTION>


                             Gross Amount At Which Carried                                               
                                  At December 31, 1996                                                            
                                          Buildings                                     
                                            And                                       
                                          Personal                Accumulated       Date of         Date     Decpreciable
        Description               Land    Property      Total     Depreciation    Construction    Acquired    Life-Years
       <S>                     <C>       <C>          <C>          <C>              <C>           <C>          <C>  
        Versailles on the Lake  $  191    $ 4,128      $ 4,319      $2,162           1970          04/84        5-25
        Ashley Woods               881      7,494        8,375       3,949           1971          07/84        5-25
                                                                
        Totals                   $1,072   $11,622      $12,694      $6,111    
</TABLE>


The depreciable lives included above are for the buildings and related personal
property. The depreciable lives for related personal property are for 5 to 15
years.


Reconciliation of "Investment Properties and Accumulated Depreciation":

                                            Year Ended December 31,
                                              1996           1995

Investment Properties

Balance at beginning of year                $12,376         $12,146
   Property improvements                        318             230
Balance at end of year                      $12,694         $12,376

Accumulated Depreciation

Balance at beginning of year                $ 5,579         $ 5,092
   Depreciation expense                         532             487
Balance at end of year                      $ 6,111         $ 5,579

The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1996 and 1995, is $12,831,000 and $12,513,000, respectively.  The
accumulated depreciation taken for Federal income tax purposes at December 31,
1996 and 1995, is $8,438,000 and $7,852,000, respectively.

ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
       FINANCIAL DISCLOSURE

  None.

                                      PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
         WITH SECTION 16(A) OF THE EXCHANGE ACT

  The names of the directors and executive officers of Davidson Diversified
Properties, Inc., the Partnership's Managing General Partner, their ages and the
nature of all positions with Davidson Diversified Properties, Inc. presently
held by them are as follows:

Name                               Age               Position

Carroll D. Vinson                  56                President, Director

William H. Jarrard, Jr.            50                Vice President

Robert D. Long, Jr.                29                Controller, Principal
                                                     Accounting Officer

John K. Lines                      37                Secretary

Kelley M. Buechler                 39                Assistant Secretary


   Carroll D. Vinson has been President of Metropolitan Asset Enhancement, L.P.,
and subsidiaries since August of 1994.  Prior to that, during 1993 to August
1994, Mr. Vinson was affiliated with Crisp, Hughes & Co. (regional CPA firm) and
engaged in various other investment and consulting activities.  Briefly, in
early 1993, Mr. Vinson served as President and Chief Executive Officer of
Angeles Corporation, a real estate investment firm.  From 1991 to 1993, Mr.
Vinson was employed by Insignia in various capacities including Managing
Director-President during 1991.

  William H. Jarrard, Jr. has been Managing Director - Partnership
Administration of Insignia since January 1991.  Mr. Jarrard served as Managing
Director - Partnership Administration and Asset Management from July 1994 until
January 1996.

   Robert D. Long, Jr. is Controller and Principal Accounting Officer.  Prior to
joining Metropolitan Asset Enhancement, L.P., and subsidiaries, he was an
auditor for the State of Tennessee and was associated with the accounting firm
of Harshman Lewis and Associates.  He is a graduate of The University of
Memphis.

  John K. Lines has been General Counsel and Secretary of Insignia since June
1994. From May 1993 until June 1994, Mr. Lines was the Assistant General Counsel
and Vice President of Ocwen Financial Corporation in West Palm Beach, Florida.
From October 1991 until April 1993, Mr. Lines was a Senior Attorney with Banc
One Corporation in Columbus, Ohio.  From May 1984 until October 1991, Mr. Lines
was employed as an Associate Attorney with Squire Sanders & Dempsey in Columbus,
Ohio.

  Kelley M. Buechler is Assistant Secretary of Insignia.  During the five years
prior to joining Insignia in 1991, she served in a similar capacity for U.S.
Shelter.


ITEM 10.  EXECUTIVE COMPENSATION

  The Registrant was not required to and did not pay remuneration to officers
and/or directors of the Managing General Partner during 1996 or 1995.  See "Item
12." below and "Note E" of the Notes to the Consolidated Financial Statements
for a discussion of compensation and reimbursements paid to the General Partners
and certain affiliates.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  As of March 1997, no Unit holder was known by the Registrant to be the
beneficial owner of more than 5% of the Units of the Registrant.

  As of February 1997, no director or officer of the Managing General Partner
owns, nor do the directors or officers as a whole own more than 1% of the
Registrant's Units.  No such director or officer had any right to acquire
beneficial ownership of additional Units of the Registrant.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  Davidson Diversified Properties, Inc., the Managing General Partner of the
Registrant, is owned by MAE GP Corporation, an affiliate of Insignia.

The majority of general partner and limited partner interests in Diversified
Equities, Ltd., the Associate General Partner, are owned by MAE Investments,
Inc. and Insignia Jacques-Miller, L.P., respectively, both of whom are
affiliates of Insignia. Effective January 1, 1992, management and administrative

services were assumed by affiliates of Insignia.  Amounts for management
services paid to these affiliates in 1996 and 1995 were $149,000 and $147,000,
respectively. Reimbursements for administrative services were paid to affiliates
of Insignia during 1996 and 1995 in the amounts of $87,000 and $88,000,
respectively.

  The Partnership Agreement provides for the Managing General Partner to
receive a fee for managing the affairs of the Registrant.  The fee is 5% of
adjusted cash from operations as defined in the Partnership Agreement.  The fee
is payable only after the Registrant has distributed, to all limited partners,
adjusted cash from operations in any year equal to 8% of their adjusted invested
capital as defined in the Partnership Agreement.  No fees were payable for the
years ended December 31, 1996 or December 31, 1995.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

 (a)    Exhibits:  see Exhibit Index contained herein.

 (b)    No Reports on Form 8-K were filed during the fourth quarter of 
        1996.


                                     SIGNATURES


     In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




                                DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.


                                By:    Davidson Diversified Properties, Inc.,
                                       as Managing General Partner


                                By:    /s/Carroll D. Vinson                  
                                       Carroll D. Vinson
                                       President


                                Date: March 27, 1997



     In accordance with the Exchange Act, this report has been signed below by
the following person on behalf of the Registrant and in the capacities and on
the date indicated.




/s/Carroll D. Vinson              President                   March 27, 1997
Carroll D. Vinson



/s/Robert D. Long, Jr.            Controller and Principal    March 27, 1997
Robert D. Long, Jr.               Accounting Officer

                                   EXHIBIT INDEX

Exhibit

3A    Partnership Agreement dated January 14, 1983 is incorporated by reference
      to Exhibit A to the Prospectus of the Registrant dated November 16, 1983
      as filed with the Commission pursuant to Rule 424(b) under the Act.

3B    Amendment No. 1 dated January 1, 1986 to the Partnership Agreement is
      incorporated by reference to Exhibit 3B to the Registrant's Annual Report
      on Form 10-K for the fiscal year ended December 31, 1985.

4     Certificate of Limited Partnership dated December 2, 1982 is incorporated
      by reference to Exhibit 4 to the Registrant's Annual Report on Form 10-K
      for the fiscal year ended December 31, 1987.

4A    Certificate of Amendment of Certificate of Limited Partnership dated
      March B4, 1983 is incorporated by reference to Exhibit 4A to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 1987.

4B    Restated Certificate of Limited Partnership dated June 8, 1983 is
      incorporated by reference to Exhibit 4B to the Registrant's Annual Report
      on Form 10-K for the fiscal year ended December 31, 1987.

4C    Amended and Restated Certificate of Limited Partnership dated January 1,
      1986 is incorporated by reference to Exhibit 4C to the Registrant's
      Annual Report on form 10-K for the fiscal year ended December 31, 1987.

10A   Agent's Agreement dated November 1, 1983 between the Registrant and
      Harvey Freeman & Sons, Inc. is incorporated by reference to Exhibit 10B
      to the Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 1983.

10B   Agreement Among Agents dated November 1, 1983 by and among Harvey Freeman
      & Sons, Inc., Harvey Freeman & Sons, Inc. of Arkansas, Harvey Freeman &
      Sons, Inc. of Florida, Harvey Freeman & Sons, Inc. of Georgia, Harvey
      Freeman & Sons, Inc. of Indiana, Harvey Freeman & Sons, Inc. of Kentucky,
      Harvey Freeman & Sons, Inc. of Mississippi, Harvey Freeman & Sons, Inc.
      of North Carolina, Harvey Freeman and Sons, Inc. of Ohio and Harvey
      Freeman & Sons, Inc. of South Carolina is incorporated by reference to
      Exhibit 10C to the Registrant's Annual Report on Form 10-K for the fiscal
      year ended December 31, 1983.

10C   Acquisition and Disposition Services Agreement dated October 3, 1983
      between the Registrant and Criswell Freeman Company is incorporated by
      reference to Exhibit 10D to the Registrant's Annual Report on Form 10-K
      for the fiscal year ended December 31, 1983.

10D   Contract for Sale of Real Estate for Versailles on the Lake dated March
      16, 1984 between Versailles on the Lake Associates, an Illinois limited
      partnership and Tennessee Trust Company, Trustee, is incorporated by
      reference to Exhibit 10(b) to the Registrant's Current Report on Form 8-K
      dated April 4, 1984.

10E   Assignment of Contract for Sale dated April 2, 1984 between Tennessee
      Trust Company, Trustee, and the Registrant (relating to Versailles on the
      Lake Apartments) is incorporated by reference to Exhibit 10L to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 1984.

10F   Note dated November 19, 1984 executed by the Registrant payable to
      American Fletcher National Bank and Trust Company relating to Versailles
      on the Lake Apartments is incorporated by reference to Exhibit 10W to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 1985.

10G   Real Estate Mortgage, Assignment of Rents and Security Agreement dated
      November 19, 1984 executed by the Registrant payable to American Fletcher
      National Bank and Trust Company relating to Versailles on the Lake is
      incorporated by reference to Exhibit 10EE to the Registrant's Annual
      Report on Form 10-K for the fiscal year ended December 31, 1985.

10H   Memorandum of Understanding among SEC Realty Corp., Tennessee Properties,
      L.P., Freeman Mortgage Corporation, J. Richard Freeman, W. Criswell
      Freeman and Jacques-Miller Properties, Inc. is incorporated by reference
      to Exhibit 10BB to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1988.

10I   Partnership Administration and Consultation Agreement among Freeman
      Properties, Inc., Freeman Diversified Properties, Inc., Residual Equities
      Limited and Jacques-Miller Properties, Inc. is incorporated by reference
      to Exhibit 10CC to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1988.

10J   Partnership Agreement of Ashley Woods Associates dated May 16, 1990 owned
      99.9% by the Registrant relating to refinancing of Ashley Woods
      Apartments is incorporated by reference to Exhibit 10EE to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 1991.

10K   Multifamily Note with Addendum dated June 14, 1990 executed by Ashley
      Woods Associates payable to PW Funding Inc. relating to Ashley Woods
      Apartments is incorporated by reference to Exhibit 10FF to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 1991.

10L   Multifamily Open-end Mortgage with Rider dated June 14, 1990 executed by
      Ashley Woods Associates in favor of PW Funding Inc. relating to Ashley
      Woods Apartments is incorporated by reference to Exhibit 10GG to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 1991.

10M   Termination Agreement, dated December 31, 1991 among Jacques-Miller,
      Inc., Jacques-Miller Property Management, Davidson Diversified
      Properties, Inc., and Supar, Inc. is incorporated by reference to Exhibit
      10HH to the Registrant's Annual Report on Form 10-K for the fiscal year
      ended December 31, 1991.

10N   Assignment of Limited Partnership Interest of Freeman Equities, Limited,
      dated December 31, 1991 between Davidson Diversified Properties, Inc and
      Insignia Jacques-Miller, L.P. is incorporated by reference to Exhibit
      10II to the Registrant's Annual Report on Form 10-K for the fiscal year
      ended December 31, 1991.

10O   Assignment of General Partner Interests of Freeman Equities, Limited,
      dated December 31, 1991 between Davidson Diversified Properties, Inc. and
      MAE GP Corporation is incorporated by reference to Exhibit 10JJ to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 1991.

10P   Stock certificate, dated December 31, 1991 showing ownership of 1,000
      shares of Davidson Diversified Properties, Inc. by MAE GP Corporation is
      incorporated by reference to Exhibit 10KK to the Registrant's Annual
      Report on Form 10-K for the fiscal year ended December 31, 1991.

10Q   Contracts related to refinancing of debt:

      (a) First Deed of Trust and Security Agreement dated October 28, 1992
          between Davidson Diversified Real Estate I, Limited Partnership and
          First Commonwealth Realty Credit Corporation, a Virginia Corporation,
          securing Versailles on the Lake is incorporated by reference to
          Exhibit 10Q (a) to the Registrant's Annual Report on Form 10-KSB for
          the fiscal year ended December 31, 1992.

      (b) Second Deed of Trust and Security Agreement dated October 28, 1992
          between Davidson Diversified Real Estate I, Limited Partnership and
          First Commonwealth Realty Credit Corporation, a Virginia Corporation,
          securing Versailles on the Lake is incorporated by reference to
          Exhibit 10Q (b) to the Registrant's Annual Report on Form 10-KSB for
          the fiscal year ended December 31, 1992.

      (c) First Assignment of Leases and Rents dated October 28, 1992 between
          Davidson Diversified Real Estate I, Limited Partnership and First
          Commonwealth Realty Credit Corporation, a Virginia Corporation,
          securing Versailles on the Lake is incorporated by reference to
          Exhibit 10Q (c) to the Registrant's Annual Report on Form 10-KSB for
          the fiscal year ended December 31, 1992.

      (d) Second Assignment of Leases and Rents dated October 28, 1992 between
          Davidson Diversified Real Estate, I Limited Partnership and First

          Commonwealth Realty Credit Corporation, a Virginia Corporation,
          securing Versailles on the Lake is incorporated by reference to
          Exhibit 10Q (d) to the Registrant's Annual Report on Form 10-KSB for
          the fiscal year ended December 31, 1992.

      (e) First Deed of Trust Note dated October 28, 1992 between Davidson
          Diversified Real Estate I Limited Partnership and First Commonwealth
          Realty Credit Corporation, relating to Versailles on the Lake is
          incorporated by reference to Exhibit 10Q (e) to the Registrant's
          Annual Report on Form 10-KSB for the fiscal year ended December 31,
          1992.

      (f) Second Deed of Trust Note dated October 28, 1992 between Davidson
          Diversified Real Estate I, Limited Partnership and First Commonwealth
          Realty Credit Corporation relating to Versailles on the Lake is
          incorporated by reference to Exhibit 10Q (f) to the Registrant's
          Annual Report on Form 10-KSB for the fiscal year ended December 31,
          1992.

16    Letter from the Registrant's former independent accountant regarding its
      concurrence with the statements made by the Registrant is incorporated by
      reference to the exhibit filed with Form 8-K dated September 30, 1992.

22    Subsidiaries - the Registrant has no subsidiaries.

27    Financial Data Schedule