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, 1996
                                
               Commission file number:  33-85076C
                                
                                
           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.)


  1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
            (Address of Principal Executive Offices)
                                
                         (612) 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 Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.

                          Yes   [X]      No
                                
         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, 1996 and December 31, 1995 

          Statements for the Periods ended September 30, 1996 and 1995:

             Operations                                 

             Cash Flows                                 

             Changes in Partners' Capital               

          Notes to Financial Statements                

 Item 2.  Management's Discussion and Analysis     

PART II.  Other Information

 Item 1.  Legal Proceedings                          

 Item 2.  Changes in Securities                      

 Item 3.  Defaults Upon Senior Securities            

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

 Item 5.  Other Information                          

 Item 6.  Exhibits and Reports on Form 8-K           




<PAGE>                                
        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

                          BALANCE SHEET
                                
            SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
                                
                           (Unaudited)
                                
                                
                             ASSETS
                                
                                                         1996         1995

CURRENT ASSETS:
   Cash and Cash Equivalents                         $ 8,559,764   $ 8,367,460
   Receivables                                            40,069        15,311
                                                      -----------   -----------
       Total Current Assets                            8,599,833     8,382,771
                                                      -----------   -----------
INVESTMENTS IN REAL ESTATE:
   Land                                                2,508,478       751,086
   Buildings and Equipment                             5,012,344     1,417,078
   Construction Advances                               1,204,480             0
   Property Acquisition Costs                            155,060        17,905
   Accumulated Depreciation                             (108,757)      (11,687)
                                                      -----------   -----------
        Net Investments in Real Estate                 8,771,605     2,174,382
                                                      -----------   -----------
               Total  Assets                         $17,371,438   $10,557,153
                                                      ===========   ===========


                        LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
   Payable to AEI Fund Management, Inc.              $   138,257   $   70,805
   Distributions Payable                                 378,000      199,829
   Unearned Rent                                          31,998            0
                                                      -----------  -----------
        Total Current Liabilities                        548,255      270,634
                                                      -----------  -----------
PARTNERS' CAPITAL (DEFICIT):
   General Partners                                      (10,334)      (4,832)
   Limited Partners, $1,000 Unit value;
    24,000 Units authorized; 20,493 and 12,290
    Units issued and outstanding in 1996 and
    1995, respectively                                16,833,517   10,291,351
                                                      -----------  -----------
       Total Partners' Capital                        16,823,183   10,286,519
                                                      -----------  -----------
          Total Liabilities and Partners' Capital    $17,371,438  $10,557,153
                                                      ===========  ===========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.

</PAGE>

<PAGE>                                
        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
                                
                     STATEMENT OF OPERATIONS
                                
               FOR THE PERIODS ENDED SEPTEMBER 30
                                
                           (Unaudited)
                                
                                
                                Three Months Ended      Nine Months Ended
                               9/30/96      9/30/95    9/30/96     9/30/95

INCOME:
 Rent                       $   168,116  $    19,453  $   377,035  $    26,146
 Investment Income              126,602       68,897      348,538      104,555
                             -----------  -----------  -----------  -----------
        Total Income            294,718       88,350      725,573      130,701
                             -----------  -----------  -----------  -----------

EXPENSES:
 Partnership Administration-
   Affiliates                    80,814       37,237      187,609       91,035
 Partnership Administration  
   and Property Management -
   Unrelated Parties              2,664        1,570       19,651        4,073
 Depreciation                    43,360        3,545       97,070        4,726
                             -----------  -----------  -----------  -----------
        Total Expenses          126,838       42,352      304,330       99,834
                             ----------   -----------  -----------  -----------

NET INCOME                  $   167,880  $    45,998  $   421,243  $    30,867
                             ==========   ===========  ===========  ===========

NET INCOME ALLOCATED:
   General Partners         $     1,678  $       460  $     4,212  $       309
   Limited Partners             166,202       45,538      417,031       30,558
                             -----------  -----------  -----------  -----------
                            $   167,880  $    45,998  $   421,243  $    30,867
                             ===========  ===========  ===========  ===========

NET INCOME PER
  LIMITED PARTNERSHIP UNIT
  (18,870, 6,570, 16,084 and 5,197
  weighted average Units 
  outstanding for the periods,
  respectively)             $      8.81  $      6.93  $     25.93   $     5.88
                             ===========  ===========  ===========   ==========


 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 PERIODS ENDED SEPTEMBER 30
                                
                           (Unaudited)
                                
                                                        1996         1995

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net  Income                                      $  421,243    $    30,867

   Adjustments to Reconcile Net Income to Net Cash
   Provided by Operating Activities:
     Depreciation                                       97,070          4,726
     Increase in Receivables                           (24,758)       (13,389)
     Increase in Payable to AEI Fund Management, Inc.   67,452         49,786
     Increase in Unearned Rent                          31,998              0
                                                    -----------    -----------
        Total Adjustments                              171,762         41,123
                                                    -----------    -----------
        Net Cash Provided By
        Operating Activities                           593,005         71,990
                                                    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Investments in Real Estate                    (6,694,293)      (800,134)
                                                    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Capital Contributions from Limited Partners    8,202,697      9,009,987
      Organization and Syndication Costs            (1,115,818)    (1,284,748)
   Increase in Distributions Payable                   178,171         52,521
   Distributions to Partners                          (971,458)      (191,803)
                                                    -----------    -----------
        Net Cash Provided By
        Financing Activities                         6,293,592      7,585,957
                                                    -----------    -----------
NET INCREASE IN CASH
   AND CASH EQUIVALENTS                                192,304      6,857,813

CASH AND CASH EQUIVALENTS,
beginning of period                                  8,367,460            986
                                                   -----------     -----------
CASH AND CASH EQUIVALENTS,
end of period                                     $  8,559,764    $ 6,858,799
                                                   ===========     ===========


 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, 1994    $  (1,915)  $         0  $    (1,915) 
 Capital Contributions                0     9,009,987    9,009,987    9,009.99

 Organization and Syndication
   Costs                            (60)   (1,284,688)  (1,284,748)

  Distributions                  (1,918)     (189,885)    (191,803)

  Net Income                        309        30,558       30,867
                               ---------   -----------  -----------  ----------
BALANCE, September 30, 1995   $ (3,584)   $ 7,565,972  $ 7,562,388    9,009.99
                               =========   ===========  ===========  ==========


BALANCE, December 31, 1995    $ (4,832)   $10,291,351  $10,286,519   12,289.81

 Capital Contributions               0      8,202,697    8,202,697    8,202.69

 Organization and Syndication
   Costs                             0     (1,115,818)  (1,115,818)

 Distributions                  (9,714)      (961,744)    (971,458)

 Net Income                      4,212        417,031      421,243
                              ---------    -----------  -----------  ----------
BALANCE, September 30, 1996  $ (10,334)   $16,833,517  $16,823,183   20,492.50
                              =========    ===========  ===========  ==========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.

</PAGE>
                                

                                
        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                       SEPTEMBER 30, 1996
                                
                           (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 of  the  Partnership.
     Robert  P.  Johnson, the President and sole  shareholder  of
     AFM,  serves  as  the  Individual  General  Partner  of  the
     Partnership.   An  affiliate of AFM,  AEI  Fund  Management,
     Inc.,  performs  the administrative and operating  functions
     for the Partnership.
     
     The   terms   of  the  Partnership  offering  call   for   a
     subscription  price of $1,000 per Limited Partnership  Unit,
     payable on acceptance of the offer.  Under the terms of  the
     Restated  Limited  Partnership  Agreement,  24,000   Limited
     Partnership Units are available for subscription  which,  if
     fully   subscribed,  will  result  in  contributed   Limited
     Partners' capital of $24,000,000.  The Partnership commenced
     operations  on April 14, 1995 when minimum subscriptions  of
     1,500  Limited Partnership Units ($1,500,000) were accepted.
     At  September 30, 1996, 20,492.503 Units ($20,492,503)  were
     subscribed  and  accepted by the Partnership.   The  General
     Partners  have contributed capital of $1,000.  The  Managing
     General  Partner has extended the offering of Units  to  the
     earlier  of  completion of sale of all Units or January  31,
     1997.
     
     During the operation of the Partnership, 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 the Partnership's 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  the  Partnership's
     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 the Partnership's 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.
     
                           
        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)
                                
(3)  Investments in Real Estate -

     In  1995,  the  Partnership elected early  adoption  of  the
     Statement  of  Financial  Accounting  Standards   No.   121,
     "Accounting for Impairment of Long-Lived Assets and for Long-
     Lived Assets to be Disposed Of."  This standard requires the
     Partnership to compare the carrying amount of its properties
     to  the estimated future cash flows expected to result  from
     the  property and its eventual disposition.  If the  sum  of
     the  expected  future cash flows is less than  the  carrying
     amount   of   the  property,  the  Statement  requires   the
     Partnership to recognize an impairment loss by the amount by
     which  the carrying amount of the property exceeds the  fair
     value  of the property.  Adoption of this Statement  is  not
     expected  to  have  a material effect on  the  Partnership's
     financial statements.
     
     The  Partnership  leases its properties to  various  tenants
     through   non-cancelable  triple  net  leases,   which   are
     classified  as operating leases.  Under a triple net  lease,
     the  lessee  is  responsible  for  all  real  estate  taxes,
     insurance,  maintenance, repairs and operating  expenses  of
     the  property.  The initial Lease terms are 20 years  except
     for the Media Play store which has a Lease term of 18 years.
     The  Leases  contain renewal options which  may  extend  the
     Lease  term  an  additional  10 years  for  the  Arby's,  an
     additional 15 years for Champp's Americana, an additional 20
     years  for the Media Play store and an additional  25  years
     for the Garden Ridge store.  The Leases contain rent clauses
     which entitle the Partnership to receive additional rent  in
     future  years  based  on  stated  rent  increases.   Certain
     lessees  have been granted options to purchase the property.
     Depending  on  the  lease,  the  purchase  price  is  either
     determined  by  a  formula, or is the greater  of  the  fair
     market value of the property or the amount determined  by  a
     formula.   In all cases, if the option were to be  exercised
     by  the lessee, the purchase price would be greater than the
     original cost of the property.
     
     The  Partnership's  properties are all  commercial,  single-
     tenant  buildings.   The cost of the  property  and  related
     accumulated  depreciation  at  September  30,  1996  are  as
     follows:

                                 Buildings and                  Accumulated
Property               Land        Equipment       Total        Depreciation

Arby's
 Montgomery, AL    $   328,310   $   425,794   $   754,104    $   22,709

Media Play
 Apple Valley, MN      422,776       991,284     1,414,060        33,278

Garden Ridge
 Pineville, NC       1,159,459     2,417,693     3,577,152        48,354

Champp's Americana
 Columbus, OH          597,933     1,177,573     1,775,506         4,416
                    -----------   -----------   -----------   -----------
                   $ 2,508,478   $ 5,012,344   $ 7,520,822   $   108,757
                    ===========   ===========   ===========   ===========


                                
        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)
                                
(3)  Investments in Real Estate - (Continued)

     On  March  28,  1996,  the Partnership  purchased  a  40.75%
     interest  in  a  Garden  Ridge  store  in  Pineville,  North
     Carolina  for $3,577,152.  The property is leased to  Garden
     Ridge,  Inc. under a Lease Agreement with a primary term  of
     20  years  and  annual  rental payments  of  $383,973.   The
     remaining interest in the property was purchased by AEI  Net
     Lease  Income & Growth Fund XIX Limited Partnership and  AEI
     Net  Lease  Income  &  Growth Fund XX  Limited  Partnership,
     affiliates of the Partnership.
     
     On  August  29,  1996,  the Partnership  purchased  a  67.8%
     interest  in  a Champp's Americana restaurant  in  Columbus,
     Ohio  for  $1,775,506.  The property is leased to  Americana
     Dining  Corporation under a Lease Agreement with  a  primary
     term  of  20  years and annual rental payments of  $191,259.
     The  remaining interest in the property was purchased by AEI
     Real Estate Fund XVIII Limited Partnership, an affiliate  of
     the Partnership.
     
     In  August, 1996, the Partnership entered into an  agreement
     to  purchase  a Denny's restaurant in Covington,  Louisiana.
     The  purchase  price will be approximately $1,111,000.   The
     property  will  be  leased to Huntington Restaurants  Group,
     Inc. under a Lease Agreement with a primary term of 20 years
     and   annual  rental  payments  of  approximately  $125,000.
     Through  September  30, 1996, the Partnership  had  advanced
     $560,485  for  the  construction of  the  property  and  was
     charging interest on the Note at the rate of 8.0%.
     
     In  August, 1996, the Partnership entered into an  agreement
     to  purchase a 93.1% interest in a Caribou Coffee  store  in
     Charlotte,  North  Carolina.  The  purchase  price  will  be
     approximately $1,274,000.  The property will  be  leased  to
     Caribou Coffee Company, Inc. under a Lease Agreement with  a
     primary  term  of  18  years and annual rental  payments  of
     approximately  $146,000.  Through September  30,  1996,  the
     Partnership  had  advanced $643,995 for the construction  of
     the  property and was charging interest on the Note  at  the
     rate of 7.0%.
     
     The  Partnership has incurred net costs of $191,052 relating
     to  the review of potential property acquisitions.  Of these
     costs, $35,992 have been capitalized and allocated to  land,
     building  and  equipment.  The remaining costs  of  $155,060
     have  been  capitalized  and will be allocated  to  property
     acquisitions in future periods.
     
(4)  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.


ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS

Results of Operations

       The Partnership's rental income is derived from long-term,
triple net lease agreements on the Partnership's properties.  For
the   nine  months  ended  September  30,  1996  and  1995,   the
Partnership  recognized rental income of  $377,035  and  $26,146,
respectively.   During  the same periods,  the  Partnership  also
earned  $348,538 and $104,555, respectively, in investment income
from  subscriptions  proceeds which were invested  in  short-term
money market accounts, commercial paper and federal agency notes.
This investment income constituted 48% and 80%, respectively,  of
total  income  for the period.  The percentage  of  total  income
represented   by  investment  income  declines  as   subscription
proceeds are invested in properties.

        The  annual  rent  from the four properties  acquired  is
$793,799.   Since  the properties are leased under  a  triple-net
lease,  the Partnership has not incurred, and does not expect  to
incur,  expenses associated with the operation or maintenance  of
property and the rental income represents the cash flow generated
by the property to the Partnership.

        During the periods ended September 30, 1996 and 1995, the
Partnership   paid   Partnership   administration   expenses   to
affiliated parties of $187,609 and $91,035, respectively.   These
administration  expenses  include  initial  start-up  costs   and
expenses  associated  with  processing  distributions,  reporting
requirements  and  correspondence to the Limited  Partners.   The
administrative expenses decrease after completion of the offering
and  acquisition phases of the Partnership's operations.   During
the   same   periods,   the  Partnership   incurred   Partnership
administration  and property management expenses  from  unrelated
parties  of  $19,651  and $4,073, respectively.   These  expenses
represent  direct payments to third parties for legal and  filing
fees,  direct administrative costs, outside audit and  accounting
costs, insurance and other property costs.

        The  Partnership distributes all of its net income during
the  offering  and  acquisition phases, and if net  income  after
deductions  for  depreciation  is  not  sufficient  to  fund  the
distributions,  the  Partnership may distribute  other  available
cash that constitutes capital for accounting purposes.

         As   of  September  30,  1996,  the  Partnership's  cash
distribution rate was 8.0% on an annualized basis.  Distributions
of  Net Cash Flow to the General Partners are subordinated to the
Limited Partners as required in the Partnership Agreement.  As  a
result,  99% of distributions were allocated to Limited  Partners
and 1% to the General Partners.

       Since the Partnership has only recently purchased its real
estate,  inflation  has  had  a minimal  effect  on  income  from
operations.   It is expected that increases in sales  volumes  of
the  tenants due to inflation and real sales growth, will  result
in  an  increase  in rental income over the term of  the  leases.
Inflation  also  may  cause  the  Partnership's  real  estate  to
appreciate in value.  However, inflation and changing prices  may
also  have  an  adverse impact on the operating  margins  of  the
properties' tenants which could impair their ability to pay  rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.


Liquidity and Capital Resources


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


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

        The Partnership Agreement requires that no more than  15%
of  the  proceeds from the sale of Units be applied  to  expenses
involved  in the sale of Units (including Commissions)  and  that
such expenses, together with acquisition expenses, not exceed 20%
of  the proceeds from the sale of Units.  As set forth under  the
caption  "Estimated  Use  of Proceeds"  of  the  Prospectus,  the
General  Partners  anticipate that 14% of such proceeds  will  be
applied  to  cover  organization and  offering  expenses  if  the
maximum  proceeds  are obtained.  To the extent organization  and
offering expenses actually incurred exceed 15% of proceeds,  they
are borne by the General Partners.

        The Partnership Agreement requires that all proceeds from
the  sale  of  Units be invested or committed  to  investment  in
properties  by  the  later of two years after  the  date  of  the
Prospectus or six months after termination of the offer and  sale
of  Units.  While the Partnership is purchasing properties,  cash
flow from investing activities (investment in real property) will
remain  negative  and will constitute the principal  use  of  the
Partnership's available cash flow.

        Before  the  acquisition of properties,  cash  flow  from
operating  activities  is  not significant.   Net  income,  after
adjustment for depreciation, is lower during the first few  years
of  operations as administrative expenses remain high and a large
amount  of the Partnership's assets remain invested on  a  short-
term  basis in lower-yielding cash equivalents.  Net income  will
become   the  largest  component  of  cash  flow  from  operating
activities  and  the  largest component of cash  flow  after  the
completion of the acquisition phase.

        During  the offering of Units, the Partnership's  primary
source  of cash flow will be from the sale of Limited Partnership
Units.   The  Partnership offered for sale up to  $24,000,000  of
limited  partnership  interests (the "Units")  (24,000  Units  at
$1,000  per Unit) pursuant to a registration statement  effective
February  1, 1995.  From February 1, 1995 to April 14, 1995,  the
minimum  number  of Limited Partnership Units (1,500)  needed  to
form the Partnership were sold and on April 14, 1995, a total  of
2,937.444   Units   ($2,937,444)  were   transferred   into   the
Partnership.  Through September 30, 1996, the Partnership  raised
a  total  of $20,492,503 from the sale of 20,492.503 Units.   The
Managing  General Partner has extended the offering of  Units  to
the  earlier  of completion of sale of all Units or  January  31,
1997.   From  subscription  proceeds,  the  Partnership  incurred
organization and syndication costs (which constitute a  reduction
of capital) of $2,831,471.

        On  March  28, 1996, the Partnership purchased  a  40.75%
interest in a Garden Ridge store in Pineville, North Carolina for
$3,577,152.  The property is leased to Garden Ridge, Inc. under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $383,973.  The remaining interest in the property was
purchased  by  AEI  Net Lease Income & Growth  Fund  XIX  Limited
Partnership  and  AEI Net Lease Income & Growth Fund  XX  Limited
Partnership, affiliates of the Partnership.

        On  August  29, 1996, the Partnership purchased  a  67.8%
interest in a Champp's Americana restaurant in Columbus, Ohio for
$1,775,506.    The   property  is  leased  to  Americana   Dining
Corporation  under a Lease Agreement with a primary  term  of  20
years  and  annual  rental payments of $191,259.   The  remaining
interest  in  the property was purchased by AEI Real Estate  Fund
XVIII Limited Partnership, an affiliate of the Partnership.

       In August, 1996, the Partnership entered into an agreement
to  purchase  a Denny's restaurant in Covington, Louisiana.   The
purchase  price will be approximately $1,111,000.   The  property
will  be  leased to Huntington Restaurants Group,  Inc.  under  a
Lease Agreement with a primary term of 20 years and annual rental
payments of approximately $125,000.  Through September 30,  1996,
the Partnership had advanced $560,485 for the construction of the
property  and was charging interest on the Note at  the  rate  of
8.0%.


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

       In August, 1996, the Partnership entered into an agreement
to  purchase  a  93.1%  interest in a  Caribou  Coffee  store  in
Charlotte,   North  Carolina.   The  purchase   price   will   be
approximately $1,274,000.  The property will be leased to Caribou
Coffee Company, Inc. under a Lease Agreement with a primary  term
of 18 years and annual rental payments of approximately $146,000.
Through September 30, 1996, the Partnership had advanced $643,995
for the construction of the property and was charging interest on
the Note at the rate of 7.0%.

         After   completion   of  the  acquisition   phase,   the
Partnership's  primary  use  of cash  flow  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 week after the end of each
quarter.    The  Partnership  attempts  to  maintain   a   stable
distribution rate from quarter to quarter.

        The  Partnership may purchase Units from Limited Partners
who have tendered their Units to the Partnership.  Such Units may
be  acquired at a discount.  The Partnership is not obligated  to
purchase  in  any  year  more than 5%  of  the  number  of  Units
outstanding at the beginning of the 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.   As  of
September  30, 1996, the Partnership has not acquired  any  Units
from Limited Partners.

        Until  capital is invested in properties, the Partnership
will  remain extremely liquid.  At September 30, 1996, $8,574,833
or  49%  of  the  Partnership's  assets  were  in  cash  or  cash
equivalents  (including  accrued  interest  receivable).    After
completion of property acquisitions, the Partnership will attempt
to   maintain  a  cash  reserve  of  only  approximately  1%   of
subscription proceeds.  Because properties are purchased for cash
and  leased under triple-net leases, this is considered  adequate
to satisfy most contingencies.

                                
                   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. CHANGES IN SECURITIES

        None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 
 
        None


                   PART II - OTHER INFORMATION
                           (Continued)
                                
ITEM 5. OTHER INFORMATION

        None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        a. Exhibits -

              27    Financial Data Schedule  for  period
                    ended September 30, 1996.

        b. Reports filed on Form  8-K  -
                     During  the quarter ended September
                     30,  1996, the Partnership filed  a
                     Form 8-K, dated September 12, 1996,
                     reporting  the  acquisition  of   a
                     67.8%   interest  in  the  Champp's
                     Americana  restaurant in  Columbus,
                     Ohio.

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


Dated: November 13, 1996      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/ Mark E. Larson
                                       Mark E. Larson
                                       Chief Financial Officer
                                       (Principal Accounting Officer)