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

                           FORM 10-QSB

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

           For the Quarter Ended:  September 30, 2007

               Commission file number:  000-29274


           AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)


     State of Minnesota                    41-1789725
(State or other Jurisdiction of         (I.R.S. Employer
Incorporation or Organization)        Identification No.)


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

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


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

Check  whether  the issuer (1) filed all reports required  to  be
filed by Section 13 or 15(d) of the Exchange Act during the  past
12  months  (or  for such shorter period that the registrant  was
required to file such reports), and (2) has been subject to  such
filing requirements for the past 90 days.        Yes [X]   No

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

Transitional Small Business Disclosure Format:   Yes       No [X]



        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP


                              INDEX




PART I. Financial Information

 Item 1. Balance Sheet as of September 30, 2007 and December 31, 2006

         Statements for the Periods ended September 30, 2007 and 2006:

           Income

           Cash Flows

           Changes in Partners' Capital

         Notes to Financial Statements

 Item 2. Management's Discussion and Analysis

 Item 3. Controls and Procedures

PART II. Other Information

 Item 1. Legal Proceedings

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

 Item 3. Defaults Upon Senior Securities

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

 Item 5. Other Information

 Item 6. Exhibits

         Signatures


<PAGE>
        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
                          BALANCE SHEET
            SEPTEMBER 30, 2007 AND DECEMBER 31, 2006

                           (Unaudited)

                             ASSETS

                                                   2007            2006
CURRENT ASSETS:
  Cash and Cash Equivalents                    $ 5,100,178     $ 1,588,082

INVESTMENTS IN REAL ESTATE:
  Land                                           4,759,346       5,886,362
  Buildings and Equipment                        9,987,497      11,693,838
  Accumulated Depreciation                      (1,543,781)     (1,910,192)
                                                -----------     -----------
                                                13,203,062      15,670,008
  Real Estate Held for Sale                        159,557         753,379
                                                -----------     -----------
      Net Investments in Real Estate            13,362,619      16,423,387
                                                -----------     -----------
          Total Assets                         $18,462,797     $18,011,469
                                                ===========     ===========

                     LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Payable to AEI Fund Management, Inc.         $    15,972     $    62,127
  Distributions Payable                            499,210         524,665
  Unearned Rent                                     25,817          24,772
                                                -----------     -----------
      Total Current Liabilities                    540,999         611,564
                                                -----------     -----------
PARTNERS' CAPITAL:
  General Partners                                  16,785          11,566
  Limited Partners, $1,000 per Unit;
   24,000 Units authorized and issued;
   22,802 Units outstanding                     17,905,013      17,388,339
                                                -----------     -----------
      Total Partners' Capital                   17,921,798      17,399,905
                                                -----------     -----------
       Total Liabilities and Partners' Capital $18,462,797     $18,011,469
                                                ===========     ===========

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

                           (Unaudited)

                               Three Months Ended       Nine Months Ended
                              9/30/07      9/30/06    9/30/07      9/30/06

RENTAL INCOME               $  318,065   $ 280,422   $  940,568   $  852,446

EXPENSES:
   Partnership Administration -
     Affiliates                 56,327      59,667      166,554      171,669
   Partnership Administration and
     Property Management -
     Unrelated Parties           3,957       4,447       29,299       30,811
   Depreciation                 99,514      89,073      298,542      263,087
                             ----------   ---------   ----------   ----------
        Total Expenses         159,798     153,187      494,395      465,567
                             ----------   ---------   ----------   ----------

OPERATING INCOME               158,267     127,235      446,173      386,879

OTHER INCOME:
   Interest Income              35,938      24,119       78,395       44,052
                             ----------   ---------   ----------   ----------
INCOME FROM CONTINUING
   OPERATIONS                  194,205     151,354      524,568      430,931

Income from Discontinued
 Operations                  1,070,437     299,299    1,388,021      914,616
                             ----------   ---------   ----------   ----------
NET INCOME                  $1,264,642   $ 450,653   $1,912,589   $1,345,547
                             ==========   =========   ==========   ==========
NET INCOME ALLOCATED:
   General Partners         $   12,647   $   4,506   $   19,126   $   13,455
   Limited Partners          1,251,995     446,147    1,893,463    1,332,092
                             ----------   ---------   ----------   ----------
                            $1,264,642   $ 450,653   $1,912,589   $1,345,547
                             ==========   =========   ==========   ==========
INCOME PER LIMITED PARTNERSHIP UNIT:
   Continuing Operations    $     8.43   $    6.57   $    22.78   $    18.71
   Discontinued Operations       46.48       13.00        60.26        39.71
                             ----------   ---------   ----------   ----------
        Total               $    54.91   $   19.57   $    83.04   $    58.42
                             ==========   =========   ==========   ==========
Weighted Average Units
 Outstanding                    22,802      22,802       22,802       22,802
                             ==========   =========   ==========   ==========

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

                           (Unaudited)

                                                     2007            2006

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income                                     $ 1,912,589   $ 1,345,547

   Adjustments to Reconcile Net Income to Net Cash
   Provided by Operating Activities:
     Depreciation                                     342,047       332,954
     Gain on Sale of Real Estate                   (1,170,293)     (568,422)
     Decrease in Receivables                                0         1,001
     Increase (Decrease) in Payable to
        AEI Fund Management, Inc.                     (46,155)       23,764
     Increase in Unearned Rent                          1,045        13,625
                                                   -----------   -----------
        Total Adjustments                            (873,356)     (197,078)
                                                   -----------   -----------
        Net Cash Provided By
           Operating Activities                     1,039,233     1,148,469
                                                   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Investments in Real Estate                               0    (1,667,348)
   Proceeds from Sale of Real Estate                3,889,014     2,185,156
                                                   -----------   -----------
        Net Cash Provided By
           Investing Activities                     3,889,014       517,808
                                                   -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Decrease in Distributions Payable                  (25,455)      (58,589)
   Distributions to Partners                       (1,390,696)   (1,582,816)
                                                   -----------   -----------
        Net Cash Used For
          Financing Activities                     (1,416,151)   (1,641,405)
                                                   -----------   -----------
NET INCREASE IN CASH
   AND CASH EQUIVALENTS                             3,512,096        24,872

CASH  AND  CASH EQUIVALENTS, beginning of period    1,588,082       862,160
                                                   -----------   -----------
CASH AND CASH EQUIVALENTS, end of period          $ 5,100,178   $   887,032
                                                   ===========   ===========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
            STATEMENT OF CHANGES IN PARTNERS' CAPITAL
               FOR THE PERIODS ENDED SEPTEMBER 30

                           (Unaudited)


                                                                   Limited
                                                                 Partnership
                              General     Limited                   Units
                              Partners    Partners     Total     Outstanding


BALANCE, December 31, 2005  $ 14,148   $17,643,943  $17,658,091    22,802.45

  Distributions              (15,828)   (1,566,988)  (1,582,816)

  Net Income                  13,455     1,332,092    1,345,547
                             -------    -----------  -----------  ----------
BALANCE, September 30, 2006 $ 11,775   $17,409,047  $17,420,822    22,802.45
                             =======    ===========  ===========  ==========


BALANCE, December 31, 2006  $ 11,566   $17,388,339  $17,399,905    22,802.45

  Distributions              (13,907)   (1,376,789)  (1,390,696)

  Net Income                  19,126     1,893,463    1,912,589
                             -------    -----------  -----------  ----------
BALANCE, September 30, 2007 $ 16,785   $17,905,013  $17,921,798    22,802.45
                             =======    ===========  ===========  ==========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
                  NOTES TO FINANCIAL STATEMENTS
                       SEPTEMBER 30, 2007

                           (Unaudited)

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

(2)  Organization -

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

     The   terms  of  the  Partnership  offering  called  for   a
     subscription  price of $1,000 per Limited Partnership  Unit,
     payable   on  acceptance  of  the  offer.   The  Partnership
     commenced   operations  on  April  14,  1995  when   minimum
     subscriptions    of   1,500   Limited   Partnership    Units
     ($1,500,000)  were  accepted.   On  January  31,  1997,  the
     offering  terminated when the maximum subscription limit  of
     24,000  Limited  Partnership Units was reached.   Under  the
     terms  of  the  Limited Partnership Agreement,  the  Limited
     Partners   and   General  Partners  contributed   funds   of
     $24,000,000 and $1,000, respectively.

     During operations, any Net Cash Flow, as defined, which  the
     General Partners determine to distribute will be distributed
     90% to the Limited Partners and 10% to the General Partners;
     provided,  however, that such distributions to  the  General
     Partners will be subordinated to the Limited Partners  first
     receiving an annual, noncumulative distribution of Net  Cash
     Flow equal to 10% of their Adjusted Capital Contribution, as
     defined,  and, provided further, that in no event  will  the
     General Partners receive less than 1% of such Net Cash  Flow
     per  annum.  Distributions to Limited Partners will be  made
     pro rata by Units.


        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)

(2)  Organization - (Continued)

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

     For  tax  purposes,  profits  from  operations,  other  than
     profits  attributable  to  the  sale,  exchange,  financing,
     refinancing  or  other  disposition  of  property,  will  be
     allocated  first  in the same ratio in  which,  and  to  the
     extent,  Net  Cash Flow is distributed to the  Partners  for
     such year.  Any additional profits will be allocated in  the
     same  ratio  as  the  last  dollar  of  Net  Cash  Flow   is
     distributed.   Net losses from operations will be  allocated
     99% to the Limited Partners and 1% to the General Partners.

     For  tax purposes, profits arising from the sale, financing,
     or  other  disposition  of property  will  be  allocated  in
     accordance  with the Partnership Agreement as  follows:  (i)
     first,  to  those  partners with deficit balances  in  their
     capital  accounts  in an amount equal to  the  sum  of  such
     deficit  balances; (ii) second, 99% to the Limited  Partners
     and  1%  to the General Partners until the aggregate balance
     in  the Limited Partners' capital accounts equals the sum of
     the Limited Partners' Adjusted Capital Contributions plus an
     amount  equal to 10% of their Adjusted Capital Contributions
     per  annum, cumulative but not compounded, to the extent not
     previously  allocated;  (iii)  third,  the  balance  of  any
     remaining  gain  will then be allocated 90% to  the  Limited
     Partners  and 10% to the General Partners.  Losses  will  be
     allocated 98% to the Limited Partners and 2% to the  General
     Partners.

     The  General Partners are not required to currently  fund  a
     deficit   capital   balance.   Upon   liquidation   of   the
     Partnership or withdrawal by a General Partner, the  General
     Partners will contribute to the Partnership an amount  equal
     to  the  lesser  of  the deficit balances in  their  capital
     accounts  or  1%  of  total Limited  Partners'  and  General
     Partners' capital contributions.

(3)  Reclassification -

     Certain items in the prior year's financial statements  have
     been  reclassified  to conform to 2007 presentation.   These
     reclassifications  had no effect on Partners'  capital,  net
     income or cash flows.

        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)

(4)  Investments in Real Estate -

     In February 2005, Winn-Dixie Montgomery, Inc., the tenant of
     the Winn-Dixie store in Panama City, Florida, and its parent
     company,  Winn-Dixie, Inc., filed for Chapter 11  bankruptcy
     reorganization.  On June 29, 2006, Winn-Dixie issued a press
     release  announcing  that  it filed  its  proposed  Plan  of
     Reorganization with the bankruptcy court.  In November 2006,
     the   bankruptcy   court  approved  Winn-Dixie's   Plan   of
     Reorganization  and  the Plan became effective.   Under  the
     Plan, Winn-Dixie assumed the Lease for this store under  its
     original terms without any rent concessions.  As of the date
     of  this  report,  Winn-Dixie has complied  with  all  Lease
     terms.

     On  September  21,  2006, the Partnership  purchased  a  62%
     interest   in   an  Applebee's  restaurant   in   Johnstown,
     Pennsylvania for $1,682,887.  The property is leased to B.T.
     Woodlipp,  Inc. under a Lease Agreement with a primary  term
     of  20  years  and  initial annual rent  of  $121,340.   The
     remaining  interest  in the property was  purchased  by  AEI
     Income  & Growth Fund XXII Limited Partnership, an affiliate
     of the Partnership.

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

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

(6)  Discontinued Operations -

     During  2006,  the Partnership sold 29.9758% of  the  Eckerd
     drug store in Utica, New York, in six separate transactions,
     to  unrelated third parties.  The Partnership received total
     net  sale  proceeds of $1,635,645, which resulted in  a  net
     gain   of   $290,312.   The  cost  and  related  accumulated
     depreciation  of  the  interests  sold  was  $1,384,963  and
     $39,630,  respectively.  For the nine months ended September
     30, 2006, the net gain was $250,379.

     During the first three months of 2007, the Partnership  sold
     its remaining 10.0242% interest in the Eckerd drug store  in
     Utica,  New York, in two separate transactions, to unrelated
     third  parties.   The Partnership received  total  net  sale
     proceeds  of  $509,303, which resulted  in  a  net  gain  of
     $59,412.   The cost and related accumulated depreciation  of
     the  interests  sold was $463,144 and $13,253, respectively.
     At  December 31, 2006, the property was classified  as  Real
     Estate Held for Sale with a book value of $449,891.

     During 2006, the Partnership sold 74.4774% of the Children's
     World  daycare  center  in  Kimberly,  Wisconsin,  in   four
     separate  transactions,  to unrelated  third  parties.   The
     Partnership  received total net sale proceeds of $1,414,328,
     which  resulted  in a net gain of $528,717.   The  cost  and
     related  accumulated depreciation of the interests sold  was
     $1,011,582 and $125,971, respectively.  For the nine  months
     ended September 30, 2006, the net gain was $318,043.


        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)

(6)  Discontinued Operations - (Continued)

     On  April  12,  2007,  the Partnership  sold  an  additional
     12.1042% of the Children's World daycare center in Kimberly,
     Wisconsin  to  an  unrelated third party.   The  Partnership
     received net sale proceeds of $236,188, which resulted in  a
     net  gain  of  $92,257.   The cost and  related  accumulated
     depreciation of the interest sold was $164,404 and  $20,473,
     respectively.   The Partnership is attempting  to  sell  its
     remaining  13.4184% interest in the property.  At  September
     30,  2007 and December 31, 2006, the property was classified
     as  Real  Estate Held for Sale with a book value of $159,557
     and $303,488, respectively.

     On  August  30,  2007,  the  Partnership  sold  the  Champps
     Americana  restaurant in San Antonio, Texas to  the  tenant.
     The  Partnership received net sale proceeds  of  $3,143,523,
     which resulted in a net gain of $1,018,624.  At the time  of
     sale,  the  cost  and related accumulated  depreciation  was
     $2,833,357 and $708,458, respectively.

     During  the  first  nine  months  of  2007  and  2006,   the
     Partnership  distributed $306,354 and $472,737 of  net  sale
     proceeds  to  the Limited and General Partners  as  part  of
     their quarterly distributions, which represented a return of
     capital  of $13.29 and $20.53 per Limited Partnership  Unit,
     respectively.  The Partnership anticipates the remaining net
     sale  proceeds  will  either  be  reinvested  in  additional
     property or distributed to the Partners in the future.

     The financial results for these properties are reflected  as
     Discontinued   Operations  in  the  accompanying   financial
     statements.   The following are the results of  discontinued
     operations for the periods ended September 30:

                                   Three Months Ended       Nine Months Ended
                                 9/30/07      9/30/06    9/30/07      9/30/06

Rental Income                $    63,086  $ 122,014   $  262,502   $  417,972
Property Management Expenses       (396)       (796)      (1,269)      (1,911)
Depreciation                    (10,877)    (16,314)     (43,505)     (69,867)
Gain on Disposal of
  Real Estate                 1,018,624     194,395    1,170,293      568,422
                              ----------   ---------   ----------   ----------
   Income from
    Discontinued Operations  $1,070,437   $ 299,299   $1,388,021   $  914,616
                              ==========   =========   ==========   ==========

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS

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

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

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

    resolution  by  the General Partners of  conflicts  with
    which they may be confronted;

    the   success  of  the  General  Partners  of   locating
    properties with favorable risk return characteristics;

    the effect of tenant defaults; and

    the  condition of the industries in which the  tenants  of
    properties owned by the Partnership operate.

The Application of Critical Accounting Policies

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

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

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

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

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

Results of Operations

       For the nine months ended September 30, 2007 and 2006, the
Partnership  recognized rental income from continuing  operations
of  $940,568 and $852,446, respectively.  In 2007, rental  income
increased  due  to  additional rent received  from  one  property
acquisition  in  2006 and rent increases on five properties.   In
2006,  rental income included $20,430 received from  a  permanent
easement on one property.

       For the nine months ended September 30, 2007 and 2006, the
Partnership  incurred  Partnership administration  expenses  from
affiliated parties of $166,554 and $171,669, respectively.  These
administration  expenses  include  costs  associated   with   the
management of the properties, processing distributions, reporting
requirements and correspondence to the Limited Partners.   During
the   same   periods,   the  Partnership   incurred   Partnership
administration  and property management expenses  from  unrelated
parties  of  $29,299 and $30,811, respectively.   These  expenses
represent  direct payments to third parties for legal and  filing
fees,  direct  administrative costs, outside audit costs,  taxes,
insurance and other property costs.

        In February 2005, Winn-Dixie Montgomery, Inc., the tenant
of  the  Winn-Dixie store in Panama City, Florida, and its parent
company,  Winn-Dixie,  Inc.,  filed  for  Chapter  11  bankruptcy
reorganization.   On  June 29, 2006, Winn-Dixie  issued  a  press
release   announcing  that  it  filed  its   proposed   Plan   of
Reorganization with the bankruptcy court.  In November 2006,  the
bankruptcy court approved Winn-Dixie's Plan of Reorganization and
the  Plan  became effective.  Under the Plan, Winn-Dixie  assumed
the  Lease  for this store under its original terms  without  any
rent concessions.  As of the date of this report, Winn-Dixie  has
complied with all Lease terms.

       For the nine months ended September 30, 2007 and 2006, the
Partnership  recognized interest income of $78,395  and  $44,052,
respectively.   In  2007, interest income increased  due  to  the
Partnership having more money invested in a money market  account
due to property sales.

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

        In  accordance  with  Statement of  Financial  Accounting
Standards  No. 144, Accounting for the Impairment or Disposal  of
Long-Lived  Assets,  upon  complete disposal  of  a  property  or
classification of a property as Real Estate Held  for  Sale,  the
Partnership  includes  the operating  results  and  sale  of  the
property   in   discontinued  operations.    In   addition,   the
Partnership reclassifies the prior periods operating results  and
any  partial  sales  of the property to discontinued  operations.
For  the  nine  months ended September 30, 2007, the  Partnership
recognized  income  from discontinued operations  of  $1,388,021,
representing rental income less property management expenses  and
depreciation of $217,728 and gain on disposal of real  estate  of
$1,170,293.   For the nine months ended September 30,  2006,  the
Partnership  recognized  income from discontinued  operations  of
$914,616,  representing  rental income less  property  management
expenses  and  depreciation of $346,194 and gain on  disposal  of
real estate of $568,422.

        During 2006, the Partnership sold 29.9758% of the  Eckerd
drug  store in Utica, New York, in six separate transactions,  to
unrelated third parties.  The Partnership received total net sale
proceeds of $1,635,645, which resulted in a net gain of $290,312.
The  cost  and related accumulated depreciation of the  interests
sold  was  $1,384,963 and $39,630, respectively.   For  the  nine
months ended September 30, 2006, the net gain was $250,379.

        During  the  first three months of 2007, the  Partnership
sold its remaining 10.0242% interest in the Eckerd drug store  in
Utica, New York, in two separate transactions, to unrelated third
parties.   The  Partnership received total net sale  proceeds  of
$509,303, which resulted in a net gain of $59,412.  The cost  and
related  accumulated  depreciation  of  the  interests  sold  was
$463,144  and $13,253, respectively.  At December 31,  2006,  the
property was classified as Real Estate Held for Sale with a  book
value of $449,891.

         During  2006,  the  Partnership  sold  74.4774%  of  the
Children's World daycare center in Kimberly, Wisconsin,  in  four
separate   transactions,  to  unrelated   third   parties.    The
Partnership received total net sale proceeds of $1,414,328, which
resulted  in  a  net  gain of $528,717.   The  cost  and  related
accumulated depreciation of the interests sold was $1,011,582 and
$125,971, respectively.  For the nine months ended September  30,
2006, the net gain was $318,043.

        On  April  12,  2007, the Partnership sold an  additional
12.1042%  of  the  Children's World daycare center  in  Kimberly,
Wisconsin to an unrelated third party.  The Partnership  received
net  sale proceeds of $236,188, which resulted in a net  gain  of
$92,257.   The cost and related accumulated depreciation  of  the
interest  sold  was  $164,404  and  $20,473,  respectively.   The
Partnership is attempting to sell its remaining 13.4184% interest
in  the  property.  At September 30, 2007 and December 31,  2006,
the  property was classified as Real Estate Held for Sale with  a
book value of $159,557 and $303,488, respectively.

        On  August  30,  2007, the Partnership sold  the  Champps
Americana  restaurant in San Antonio, Texas to the  tenant.   The
Partnership  received  net  sale proceeds  of  $3,143,523,  which
resulted  in a net gain of $1,018,624.  At the time of sale,  the
cost  and  related  accumulated depreciation was  $2,833,357  and
$708,458, respectively.

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

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

Liquidity and Capital Resources

        During  the  nine months ended September  30,  2007,  the
Partnership's cash balances increased $3,512,096 as a  result  of
cash  generated  from the sale of property, which  was  partially
offset  by distributions paid to the Partners in excess  of  cash
generated  from  operating activities.  During  the  nine  months
ended   September  30,  2006,  the  Partnership's  cash  balances
increased $24,872 as a result of cash generated from the sale  of
property,  which  was partially offset by cash used  to  purchase
property and distributions paid to the Partners in excess of cash
generated from operating activities.

        Net  cash provided by operating activities decreased from
$1,148,469  in  2006  to $1,039,233 in 2007  as  a  result  of  a
decrease  in  total rental and interest income in  2007  and  net
timing differences in the collection of payments from the tenants
and  the  payment of expenses, which were partially offset  by  a
decrease  in  Partnership administration and property  management
expenses in 2007.

        The  major components of the Partnership's cash flow from
investing activities are investments in real estate and  proceeds
from  the  sale  of  real estate.  During the nine  months  ended
September 30, 2007 and 2006, the Partnership generated cash  flow
from  the  sale  of  real  estate of $3,889,014  and  $2,185,156,
respectively.  During the nine months ended September  30,  2006,
the  Partnership expended $1,667,348 to invest in real properties
(inclusive of acquisition expenses) as the Partnership reinvested
cash generated from property sales.

        On  September 21, 2006, the Partnership purchased  a  62%
interest  in  an Applebee's restaurant in Johnstown, Pennsylvania
for  $1,682,887.  The property is leased to B.T.  Woodlipp,  Inc.
under  a  Lease  Agreement with a primary term of  20  years  and
initial annual rent of $121,340.  The remaining interest  in  the
property  was purchased by AEI Income & Growth Fund XXII  Limited
Partnership, an affiliate of the Partnership.

        The  Partnership's primary use of cash flow,  other  than
investment   in  real  estate,  is  distribution  and  redemption
payments  to  Partners.   The Partnership  declares  its  regular
quarterly distributions before the end of each quarter  and  pays
the  distribution in the first ten days after  the  end  of  each
quarter.    The  Partnership  attempts  to  maintain   a   stable
distribution  rate from quarter to quarter.  Redemption  payments
are  paid  to  redeeming Partners in the fourth quarter  of  each
year.


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

       For the nine months ended September 30, 2007 and 2006, the
Partnership  declared distributions of $1,390,696 and $1,582,816,
respectively, which were distributed 99% to the Limited  Partners
and  1%  to the General Partners.  The Limited Partners  received
distributions  of  $1,376,789  and  $1,566,988  and  the  General
Partners  received distributions of $13,907 and $15,828  for  the
periods,   respectively.   In  June  and  September   2007,   the
Partnership  declared special distributions of net sale  proceeds
of  $70,707  and $118,182, respectively.  In June, September  and
December 2006, the Partnership declared special distributions  of
net   sale   proceeds   of  $237,374,  $118,182   and   $118,182,
respectively, which resulted in higher distributions in 2006.

        During  the  first  nine months of  2007  and  2006,  the
Partnership  distributed  $306,354  and  $472,737  of  net   sale
proceeds  to  the Limited and General Partners as part  of  their
quarterly distributions, which represented a return of capital of
$13.29  and  $20.53  per Limited Partnership Unit,  respectively.
The  Partnership anticipates the remaining net sale proceeds will
either be reinvested in additional property or distributed to the
Partners in the future.

        The  Partnership may acquire Units from Limited  Partners
who have tendered their Units to the Partnership.  Such Units may
be acquired at a discount.  The Partnership will not be obligated
to purchase in any year any number of Units that, when aggregated
with  all  other transfers of Units that have occurred since  the
beginning   of  the  same  calendar  year  (excluding   Permitted
Transfers as defined in the Partnership Agreement), would  exceed
5%  of the total number of Units outstanding on January 1 of such
year.  In no event shall the Partnership be obligated to purchase
Units if, in the sole discretion of the Managing General Partner,
such  purchase  would  impair the capital  or  operation  of  the
Partnership.

        On October 1, 2007, two Limited Partners redeemed a total
of  23.33  Partnership Units for $9,445 in  accordance  with  the
Partnership  Agreement.   The Partnership  acquired  these  Units
using   Net   Cash  Flow  from  operations.   During  2006,   the
Partnership  did not redeem any Units from the Limited  Partners.
In  prior years, a total of 58 Limited Partners redeemed 1,197.55
Partnership  Units  for $949,024.  The redemptions  increase  the
remaining   Limited   Partners'   ownership   interest   in   the
Partnership.   As  a  result  of these  redemption  payments  and
pursuant  to  the  Partnership Agreement,  the  General  Partners
received distributions of $95 in 2007.

       The continuing rent payments from the properties, together
with  cash  generated from property sales, should be adequate  to
fund   continuing   distributions  and  meet  other   Partnership
obligations on both a short-term and long-term basis.

ITEM 3.  CONTROLS AND PROCEDURES.

       (a) Evaluation of disclosure controls and procedures

        Under  the  supervision  and with  the  participation  of
management, including its President and Chief Financial  Officer,
the  Managing  General Partner of the Partnership  evaluated  the
effectiveness  of  the  design and operation  of  its  disclosure
controls  and procedures (as defined in Rule 13a-14(c) under  the
Exchange  Act).   Based upon that evaluation, the  President  and
Chief Financial Officer of the Managing General Partner concluded
that,  as  of  the end of the period covered by this report,  the
disclosure  controls  and  procedures  of  the  Partnership  were
effective  in ensuring that information required to be  disclosed
by  us in the reports we file or submit under the Exchange Act is
recorded,  processed, summarized and reported,  within  the  time
periods  specified in applicable rules and forms  and  that  such
information   is  accumulated  and  communicated  to  management,
including  the  President  and Chief  Financial  Officer  of  the
Managing  General  Partner,  in  a  manner  that  allows   timely
decisions regarding required disclosure.

       (b)  Changes in internal controls

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

                   PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

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

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

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

       (b) Not applicable.

        (c) Pursuant to Section 7.7 of the Partnership Agreement,
each  Limited  Partner  has the right to  present  Units  to  the
Partnership  for  purchase by submitting notice to  the  Managing
General  Partner  during September of each  year.   The  purchase
price  of  the  Units  is  based on a formula  specified  in  the
Partnership  Agreement.  Units tendered to  the  Partnership  are
redeemed  on  October 1st of each year subject to  the  following
limitations.  The Partnership will not be obligated  to  purchase
in  any  year any number of Units that, when aggregated with  all
other  transfers of Units that have occurred since the  beginning
of  the  same  calendar  year (excluding Permitted  Transfers  as
defined  in the Partnership Agreement), would exceed  5%  of  the
total number of Units outstanding on January 1 of such year.   In
no event shall the Partnership be obligated to purchase Units if,
in  the  sole  discretion of the Managing General  Partner,  such
purchase   would   impair  the  capital  or  operation   of   the
Partnership.   During  the period covered  by  this  report,  the
Partnership did not purchase any Units.


                   PART II - OTHER INFORMATION
                           (Continued)

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

      None.

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

      None

ITEM 5.OTHER INFORMATION

      None.

ITEM 6.EXHIBITS

    10.1  Purchase  Agreement dated August 6,  2007  between  the
    Partnership  and  Champps Operating Corporation  relating  to
    the  Property  at  11075  Interstate  Highway  10  West,  San
    Antonio, Texas (incorporated by reference to Exhibit 10.1  of
    Form 8-K filed September 6, 2007).

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

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

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

                           SIGNATURES

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


Dated:  November 9, 2007      AEI Income & Growth Fund XXI
                              Limited Partnership
                              By:  AEI Fund Management XXI, Inc.
                              Its: Managing General Partner


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


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