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:  June 30, 2003

                Commission file number:  0-29274


           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 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


                                                     Page

PART I. Financial Information

    Item 1. Balance Sheet as of June 30, 2003 and
            December 31, 2002                         3

        Statements for the Periods ended June 30, 2003 and 2002:

            Income                                    4

            Cash Flows                                5

            Changes in Partners' Capital              6

        Notes to Financial Statements               7 - 12

    Item 2. Management's Discussion and Analysis   12 - 16

    Item 3. Controls and Procedures                   17

PART II.  Other Information

    Item 1. Legal Proceedings                         17

    Item 2. Changes in Securities                     17

    Item 3. Defaults Upon Senior Securities           17

    Item 4. Submission of Matters to a Vote of
            Security Holders                          17

    Item 5. Other Information                         17

    Item 6. Exhibits and Reports on Form 8-K          18

        Signatures                                    18



<PAGE>
        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

                          BALANCE SHEET

               JUNE 30, 2003 AND DECEMBER 31, 2002

                           (Unaudited)

                             ASSETS

                                              2003       2002

CURRENT ASSETS:
  Cash and Cash Equivalents               $4,784,760  $4,653,629
  Receivables                                      0      15,194
                                           ---------   ---------
      Total Current Assets                 4,784,760   4,668,823
                                           ---------   ---------
INVESTMENTS IN REAL ESTATE:
  Land                                     5,008,443   5,367,113
  Buildings and Equipment                 10,352,422  10,035,149
  Construction in Progress                         0      44,281
  Accumulated Depreciation                (1,514,297) (1,399,695)
                                           ---------   ---------
      Net Investments in Real Estate      13,846,568  14,046,848
                                           ---------   ---------
          Total Assets                   $18,631,328 $18,715,671
                                           =========   =========


                LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Payable to AEI Fund Management, Inc.    $   26,957  $   28,714
  Distributions Payable                      405,694     648,117
                                           ---------   ---------
      Total Current Liabilities              432,651     676,831
                                           ---------   ---------
PARTNERS' CAPITAL:
  General Partners                            19,552      17,954
  Limited Partners, $1,000 Unit Value;
      24,000 Units authorized and issued;
      23,025 Units outstanding            18,179,125  18,020,886
                                           ---------   ---------
      Total Partners' Capital             18,198,677  18,038,840
                                           ---------   ---------
          Total Liabilities and
          Partners' Capital              $18,631,328 $18,715,671
                                           =========   =========






 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 JUNE 30

                           (Unaudited)

                                Three Months Ended       Six Months Ended
                                6/30/03   6/30/02        6/30/03 6/30/02

RENTAL INCOME                  $382,028  $336,811      $  750,320 $  680,724

EXPENSES:
   Partnership Administration -
     Affiliates                  39,766    64,102         107,074    144,499
   Partnership Administration
     and Property Management -
     Unrelated Parties            4,234    22,197          17,830     33,093
   Depreciation                  95,567    81,125         185,283    167,983
                                -------   -------         -------    -------
        Total Expenses          139,567   167,424         310,187    345,575
                                -------   -------         -------    -------

OPERATING INCOME                242,461   169,387         440,133    335,149

OTHER INCOME:
   Interest Income               29,828    21,302          54,550     39,407
   Gain on Sale of Real Estate        0   337,582               0    673,732
                                -------   -------         -------    -------
        Total Other Income       29,828   358,884          54,550    713,139
                                -------   -------         -------    -------
INCOME FROM CONTINUING
   OPERATIONS                   272,289   528,271         494,683  1,048,288

Income from Discontinued
   Operations                   456,995    29,704         483,342     39,832
                                -------   -------         -------    -------
NET INCOME                     $729,284 $ 557,975       $ 978,025 $1,088,120
                                =======   =======         =======    =======

NET INCOME ALLOCATED:
   General Partners            $  7,293 $   5,580       $   9,780    $10,881
   Limited Partners             721,991   552,395         968,245  1,077,239
                                -------   -------         -------    -------
                               $729,284 $ 557,975       $ 978,025 $1,088,120
                                =======   =======         =======   ========
INCOME PER LIMITED PARTNERSHIP UNIT:
   Continuing Operations       $  11.71 $   22.51       $   21.27 $    44.67
   Discontinued Operations        19.65      1.26           20.78       1.69
                                -------   -------         -------    -------
        Total                  $  31.36 $   23.77       $   42.05 $    46.36
                                 ======    ======          ======     ======
Weighted Average Units
   Outstanding                   23,025    23,235          23,025     23,235
                                 ======    ======          ======     ======

 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 JUNE 30

                           (Unaudited)

                                                       2003       2002

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income                                      $  978,025  $ 1,088,120

   Adjustments to Reconcile Net Income to Net Cash
   Provided by Operating Activities:
     Depreciation                                     205,593      191,775
     Gain on Sale of Real Estate                     (437,913)    (660,488)
     Decrease in Receivables                           15,194        9,567
     Increase (Decrease) in Payable to
        AEI Fund Management, Inc.                      (1,757)      15,191
     Increase in Unearned Rent                              0       84,045
                                                    ---------    ---------
        Total Adjustments                            (218,883)    (359,910)
                                                    ---------    ---------
        Net Cash Provided By
           Operating Activities                       759,142      728,210
                                                    ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Investments in Real Estate                      (1,348,836)  (4,131,554)
   Proceeds from Sale of Real Estate                1,781,436    2,763,828
                                                    ---------    ---------
        Net Cash Provided By (Used For)
           Investing Activities                       432,600   (1,367,726)
                                                    ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Decrease in Distributions Payable                 (242,423)           0
   Distributions to Partners                         (818,188)    (818,175)
                                                    ---------    ---------
        Net Cash Used For
           Financing Activities                    (1,060,611)    (818,175)
                                                    ---------    ---------
NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                               131,131   (1,457,691)

CASH  AND  CASH EQUIVALENTS,
   beginning of period                              4,653,629    4,460,840
                                                    ---------    ---------
CASH AND CASH EQUIVALENTS, end of period           $4,784,760   $3,003,149
                                                    =========    =========



 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 JUNE 30

                           (Unaudited)

                                                                 Limited
                                                               Partnership
                           General     Limited                    Units
                           Partners    Partners     Total      Outstanding


BALANCE, December 31, 2001  $13,932  $17,592,673  $17,606,605  23,235.35

  Distributions              (8,182)    (809,993)    (818,175)

  Net Income                 10,881    1,077,239    1,088,120
                            --------    --------     --------   --------
BALANCE, June 30, 2002      $16,631  $17,859,919  $17,876,550  23,235.35
                            =======    =========    =========  =========


BALANCE, December 31, 2002  $17,954  $18,020,886  $18,038,840  23,025.33

  Distributions              (8,182)    (810,006)    (818,188)

  Net Income                  9,780      968,245      978,025
                           --------     --------     --------   --------
BALANCE, June 30, 2003      $19,552  $18,179,125  $18,198,677  23,025.33
                            =======    =========    =========  =========





 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

                          JUNE 30, 2003

                           (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  shareholder  of  AFM,  serves  as  the
     Individual General Partner and an affiliate of AFM, AEI Fund
     Management,  Inc.  (AEI), 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.   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

                          JUNE 30, 2003
                           (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)  SUMMARY OF REAL ESTATE ACCOUNTING POLICIES -

     The  Partnership's real estate is leased  under  triple  net
     leases  classified as operating leases.  The leases  provide
     for   base   annual  rental  payments  payable  in   monthly
     installments.   The  Partnership recognizes  rental  revenue
     according to the terms of the individual leases.  For leases
     which  contain  stated rental increases, the  increases  are
     recognized   in  the  year  in  which  they  are  effective.
     Contingent   rental   payments  are  recognized   when   the
     contingencies on which the payments are based are  satisfied
     and  the rental payments become due under the terms  of  the
     leases.

        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                          JUNE 30, 2003
                           (Continued)

(3)  SUMMARY OF REAL ESTATE ACCOUNTING POLICIES - (Continued)

     Real  estate  is recorded at the lower of cost or  estimated
     net realizable value.  The Partnership compares the carrying
     amount  of  its  properties  to the  estimated  probability-
     weighted  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 Partnership recognizes an  impairment
     loss  by  the  amount by which the carrying  amount  of  the
     property exceeds the fair value of the property.

     The  Partnership  has  capitalized as  Investments  in  Real
     Estate  certain costs incurred in the review and acquisition
     of  the  properties.  The costs were allocated to the  land,
     buildings and equipment.

     The   buildings   and  equipment  of  the  Partnership   are
     depreciated  using  the straight-line method  for  financial
     reporting  purposes based on estimated useful  lives  of  25
     years and 5 years, respectively.

     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.

     The Partnership accounts for properties owned as tenants-in-
     common  with affiliated Partnerships and/or unrelated  third
     parties using the proportionate consolidation method.   Each
     tenant-in-common owns a separate, undivided interest in  the
     properties.  Any tenant-in-common that holds more than a 50%
     interest does not control decisions over the other tenant-in-
     common  interests.   The financial statements  reflect  only
     this Partnership's percentage share of the properties' land,
     building and equipment, liabilities, revenues and expenses.

(4)  RECLASSIFICATION -

     Certain items in the prior year's financial statements  have
     been  reclassified  to conform to 2003 presentation.   These
     reclassifications  had no effect on Partners'  capital,  net
     income or cash flows.

(5)  INVESTMENTS IN REAL ESTATE -

     Through December 31, 2002, the Partnership sold 99.8466%  of
     the  Champps  Americana restaurant in Livonia, Michigan,  in
     twenty-one   separate  transactions,  to   unrelated   third
     parties.   The Partnership received total net sale  proceeds
     of  $5,490,789, which resulted in a net gain of  $1,888,226.
     The  total cost and related accumulated depreciation of  the
     interests  sold  was $4,143,694 and $541,131,  respectively.
     For  the  six months ended June 30, 2002, the net  gain  was
     $673,732.

        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                          JUNE 30, 2003
                           (Continued)

(5)  INVESTMENTS IN REAL ESTATE - (Continued)

     During  2002,  the Partnership sold 23.8161% of  the  Johnny
     Carino's  restaurant  in Austin, Texas,  in  three  separate
     transactions,  to unrelated third parties.  The  Partnership
     received total net sale proceeds of $603,681, which resulted
     in  a  net  gain  of  $68,672.  The total cost  and  related
     accumulated depreciation of the interests sold was  $544,819
     and $9,810, respectively.  For the six months ended June 30,
     2002, the net gain was $-0-.

     Subsequent to June 30, 2003, the Partnership sold 5.9244% of
     the  Champps Americana restaurant in Centerville,  Ohio,  in
     two  separate transactions, to unrelated third parties.  The
     Partnership  received  net  sale proceeds  of  approximately
     $334,000  which  resulted  in a net  gain  of  approximately
     $124,000.

     During   the  first  six  months  of  2003  and  2002,   the
     Partnership  distributed $72,483 and $198,768  of  net  sale
     proceeds  to  the Limited and General Partners  as  part  of
     their quarterly distributions which represented a return  of
     capital  of  $3.12  and $8.47 per Limited Partnership  Unit,
     respectively.  The remaining net sale proceeds  will  either
     be  reinvested in additional property or distributed to  the
     Partners in the future.

     On June 14, 2002, the Partnership purchased three Children's
     World   daycare  centers  located  in  Andover,   Minnesota,
     Ballwin,  Missouri and Kimberly, Wisconsin.  The  properties
     were  purchased  for $1,264,207, $1,517,778 and  $1,358,239,
     respectively.    The  properties  are  leased   to   ARAMARK
     Educational  Resources,  Inc. under  Lease  Agreements  with
     primary  terms  of  15 years and annual rental  payments  of
     $120,204, $144,113 and $129,087, respectively.

     On  October 31, 2002, the Partnership purchased a parcel  of
     land   in   Farmington,  New  Mexico  for   $810,000.    The
     Partnership  obtained title to the land in the  form  of  an
     undivided  fee  simple interest. The land is leased  to  SFG
     Farmington  I  Limited  Partnership  (SFG)  under  a   Lease
     Agreement with a primary term of 20 years and annual  rental
     payments  of  $85,050.  Simultaneously with the purchase  of
     the   land,  the  Partnership  entered  into  a  Development
     Financing  Agreement  under which the  Partnership  advanced
     funds  to  SFG  for  the construction of a  Johnny  Carino's
     restaurant  on  the  site.   Pursuant  to  the  Lease,   any
     improvements  to  the land during the  term  of  the  Lease,
     become  property  of  the  lessor. The  Partnership  charged
     interest  on the advances at a rate of 10.5%.   On  May  28,
     2003,   after  the  development  was  completed,  the  Lease
     Agreement  was amended to require annual rental payments  of
     $231,000.   Total acquisition costs, including the  cost  of
     the land, were $2,183,344.

(6)  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.



        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                          JUNE 30, 2003
                           (Continued)

(7)  DISCONTINUED OPERATIONS -

     Through  December 31, 2002, the Partnership sold  its  49.6%
     interest  in the Champps Americana restaurant in Schaumburg,
     Illinois,  in  thirteen separate transactions, to  unrelated
     third  parties.   The Partnership received  total  net  sale
     proceeds  of  $2,892,414, which resulted in a  net  gain  of
     $838,268.    The   total   cost  and   related   accumulated
     depreciation  of  the  interests  sold  was  $2,256,461  and
     $202,315, respectively.  For the six months ended  June  30,
     2002, the net gain was $16,738.

     During  the  first six months of 2003, the Partnership  sold
     88.6145% of the Children's World in Mundelein, Illinois,  in
     six  separate transactions, to unrelated third parties.  The
     Partnership  received total net sale proceeds of $1,781,436,
     which  resulted in a net gain of $437,913.  The  total  cost
     and  related accumulated depreciation of the interests  sold
     was $1,434,514 and $90,991, respectively.

     Subsequent  to  June  30,  2003, the  Partnership  sold  its
     remaining  11.3855%  interest in  the  Children's  World  in
     Mundelein,  Illinois  to  an  unrelated  third  party.   The
     Partnership  received  net  sale proceeds  of  approximately
     $229,000,  which  resulted in a net  gain  of  approximately
     $57,000.

     In  May 2001, Huntington Restaurants Group, Inc. (HRG),  the
     lessee  of  the  Denny's Restaurant in Covington,  Louisiana
     notified  the Partnership that it was experiencing financial
     problems  and would not make the lease payments  while  they
     worked  out  a  plan  which would enable  them  to  continue
     operations   without  seeking  bankruptcy  protection.    In
     October, 2001, the Partnership received an offer to buy  the
     restaurant  for  $900,000  from an  unrelated  third  party.
     Effective December 10, 2001, the Partnership terminated  the
     Lease  to accommodate the sale. Through this date, HRG  owed
     $80,316  of  rent, which will not be collected and  was  not
     accrued  for  financial reporting purposes.   In  the  third
     quarter  of  2001, a charge to operations  for  real  estate
     impairment  of  $295,354  was  recognized,  which  was   the
     difference between the book value at September 30,  2001  of
     $1,145,354 and the estimated net sales proceeds of $850,000.
     The charge was recorded against the cost of the building and
     equipment.  On February 19, 2002, the sale closed  with  the
     Partnership  receiving net sale proceeds of  $816,143  which
     resulted in a net loss of $29,982.

        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                          JUNE 30, 2003
                           (Continued)

(7)  DISCONTINUED OPERATIONS - (Continued)

     The financial results for these properties are reflected  as
     Discontinued   Operations  in  the  accompanying   financial
     statements.  The results of discontinued operations  are  as
     follows:


                              Three Months Ended      Six Months Ended
                              6/30/03   6/30/02        6/30/03 6/30/02

Rental Income                $ 28,167 $ 41,428       $ 66,595  $ 81,107
Property Management Expenses     (604)     105           (856)   (4,239)
Depreciation                   (8,481) (11,829)       (20,310)  (23,792)
Gain (Loss) on Disposal of
  Real Estate                 437,913        0        437,913   (13,244)
                              -------  -------        -------   -------
Income from Discontinued
     Operations             $ 456,995$  29,704      $ 483,342  $ 39,832
                              =======  =======        =======   =======



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, taxation levels, 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
          affects 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.

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

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.

       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

        Management's  discussion of the  results  of  operations,
liquidity and capital resources for the six months ended June 30,
2003  and  2002  includes  comparisons of  total  rental  income,
expenses  and  gains (losses) on sales of real  estate  resulting
from  both  Continuing  and Discontinued  Operations.   Reference
should  be  made  to  Note 7 of the Financial  Statements  for  a
summary of the components of Discontinued Operations.

        For  the  six  months ended June 30, 2003 and  2002,  the
Partnership  recognized rental income of $816,915  and  $761,831,
respectively.   During the same periods, the  Partnership  earned
interest  income of $54,550 and $39,407, respectively.  In  2003,
rental  income increased as a result of additional rent  received
from  four  property acquisitions in 2002, and rent increases  on
three   properties.   These  increases  in  rental  income   were
partially offset by a decrease in rent due to property sales.  In
2003,  interest income increased due to the Partnership receiving
interest from construction advances.


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

       In May 2001, Huntington Restaurants Group, Inc. (HRG), the
lessee of the Denny's Restaurant in Covington, Louisiana notified
the  Partnership that it was experiencing financial problems  and
would  not make the lease payments while they worked out  a  plan
which  would  enable them to continue operations without  seeking
bankruptcy   protection.   In  October,  2001,  the   Partnership
received  an  offer to buy the restaurant for  $900,000  from  an
unrelated   third  party.   Effective  December  10,  2001,   the
Partnership terminated the Lease to accommodate the sale. Through
this  date, HRG owed $80,316 of rent, which will not be collected
and  was  not accrued for financial reporting purposes.   In  the
third  quarter  of 2001, a charge to operations for  real  estate
impairment  of $295,354 was recognized, which was the  difference
between  the  book value at September 30, 2001 of $1,145,354  and
the  estimated  net sales proceeds of $850,000.  The  charge  was
recorded  against  the cost of the building  and  equipment.   On
February 19, 2002, the sale closed with the Partnership receiving
net  sale  proceeds of $816,143 which resulted in a net  loss  of
$29,982.

        During  the six months ended June 30, 2003 and 2002,  the
Partnership   paid   Partnership   administration   expenses   to
affiliated parties of $107,074 and $144,499, 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  $18,686 and $37,332, respectively.   These  expenses
represent  direct payments to third parties for legal and  filing
fees,  direct administrative costs, outside audit and  accounting
costs, taxes, insurance and other property costs.

        As of June 30, 2003, the Partnership's annualized regular
cash  distribution rate was 6.75%, based on the Adjusted  Capital
Contribution.   Distributions of Net Cash  Flow  to  the  General
Partners were 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.

        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  six  months  ended  June  30,  2003,   the
Partnership's  cash balances increased $131,131 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  increased
from  $728,210  in 2002 to $759,142 in 2003 as  a  result  of  an
increase  in  total rental and interest income and a decrease  in
Partnership administration expenses in 2003, which were partially
offset  by  net timing differences in the collection of  payments
from the lessees and the payment of expenses.


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

        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 six months ended  June
30,  2003 and 2002, the Partnership generated cash flow from  the
sale  of  real estate of $1,781,436 and $2,763,828.   During  the
same periods, the Partnership expended $1,348,836 and $4,131,554,
respectively,   to  invest  in  real  properties  (inclusive   of
acquisition   expenses)  as  the  Partnership   reinvested   cash
generated from property sales.

        Through December 31, 2002, the Partnership sold its 49.6%
interest  in  the  Champps  Americana restaurant  in  Schaumburg,
Illinois,  in thirteen separate transactions, to unrelated  third
parties.   The  Partnership received total net sale  proceeds  of
$2,892,414, which resulted in a net gain of $838,268.  The  total
cost  and related accumulated depreciation of the interests  sold
was  $2,256,461 and $202,315, respectively.  For the  six  months
ended June 30, 2002, the net gain was $16,738.

        Through  December 31, 2002, the Partnership sold 99.8466%
of  the  Champps  Americana restaurant in Livonia,  Michigan,  in
twenty-one  separate  transactions, to unrelated  third  parties.
The  Partnership received total net sale proceeds of  $5,490,789,
which  resulted in a net gain of $1,888,226.  The total cost  and
related  accumulated  depreciation  of  the  interests  sold  was
$4,143,694 and $541,131, respectively.  For the six months  ended
June 30, 2002, the net gain was $673,732.

        During 2002, the Partnership sold 23.8161% of the  Johnny
Carino's   restaurant  in  Austin,  Texas,  in   three   separate
transactions,  to  unrelated  third  parties.   The   Partnership
received total net sale proceeds of $603,681, which resulted in a
net  gain  of  $68,672.  The total cost and  related  accumulated
depreciation  of  the  interests sold was  $544,819  and  $9,810,
respectively.   For the six months ended June 30, 2002,  the  net
gain was $-0-.

        During the first six months of 2003, the Partnership sold
88.6145% of the Children's World in Mundelein, Illinois,  in  six
separate   transactions,  to  unrelated   third   parties.    The
Partnership  received  net  sale proceeds  of  $1,781,436,  which
resulted  in a net gain of $437,913.  The total cost and  related
accumulated depreciation of the interests sold was $1,434,514 and
$90,991, respectively.

        Subsequent  to  June 30, 2003, the Partnership  sold  its
remaining   11.3855%  interest  in   the  Children's   World   in
Mundelein, Illinois to an unrelated third party.  The Partnership
received  net  sale  proceeds  of approximately  $229,000,  which
resulted in a net gain of approximately $57,000.

        Subsequent to June 30, 2003, the Partnership sold 5.9244%
of  the Champps Americana restaurant in Centerville, Ohio, in two
separate   transactions,  to  unrelated   third   parties.    The
Partnership received net sale proceeds of approximately  $334,000
which resulted in a net gain of approximately $124,000.
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

        During  the  first  six  months of  2003  and  2002,  the
Partnership distributed $72,483 and $198,768 of net sale proceeds
to  the  Limited and General Partners as part of their  quarterly
distributions which represented a return of capital of $3.12  and
$8.47  per Limited Partnership Unit, respectively.  The remaining
net  sale  proceeds  will  either  be  reinvested  in  additional
property or distributed to the Partners in the future.

         On  June  14,  2002,  the  Partnership  purchased  three
Children's  World daycare centers located in Andover,  Minnesota,
Ballwin,  Missouri and Kimberly, Wisconsin.  The properties  were
purchased    for    $1,264,207,   $1,517,778   and    $1,358,239,
respectively.   The properties are leased to ARAMARK  Educational
Resources, Inc. under Lease Agreements with primary terms  of  15
years  and  annual  rental  payments of  $120,204,  $144,113  and
$129,087, respectively.

      On October 31, 2002, the Partnership purchased a parcel  of
land  in  Farmington, New Mexico for $810,000.   The  Partnership
obtained title to the land in the form of an undivided fee simple
interest.  The  land  is  leased  to  SFG  Farmington  I  Limited
Partnership (SFG) under a Lease Agreement with a primary term  of
20  years  and annual rental payments of $85,050.  Simultaneously
with  the  purchase of the land, the Partnership entered  into  a
Development  Financing  Agreement  under  which  the  Partnership
advanced  funds to SFG for the construction of a Johnny  Carino's
restaurant  on the site.  Pursuant to the Lease, any improvements
to  the land during the term of the Lease, become property of the
lessor.  The  Partnership charged interest on the advances  at  a
rate  of  10.5%.   On  May 28, 2003, after  the  development  was
completed,  the  Lease Agreement was amended  to  require  annual
rental  payments of $231,000.  Total acquisition costs, including
the cost of the land, were $2,183,344.

       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 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.   In December 2002, the Partnership declared a  bonus
distribution of $242,424 of net sale proceeds, which resulted  in
a higher distribution payable at December 31, 2002.

        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.

        During  2002, eight Limited Partners redeemed a total  of
210.02  Partnership  Units for $156,938 in  accordance  with  the
Partnership  Agreement.   The Partnership  acquired  these  Units
using  Net Cash Flow from operations.  In prior years, 33 Limited
Partners  redeemed  a  total  of  764.65  Partnership  Units  for
$647,929.    The  redemptions  increase  the  remaining   Limited
Partners' ownership interest in the Partnership.

       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   are
adequately  designed to ensure 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.

       (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. CHANGES IN SECURITIES

      None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

      None.

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

      None

ITEM 5. OTHER INFORMATION

      None.
                   PART II - OTHER INFORMATION
                           (Continued)

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      a. Exhibits -
                             Description

    10.1  First  Amendment to Net Lease Agreement dated  May  28,
    2003  between  the Partnership and SFG Farmington  I  Limited
    Partnership  relating  to  the property  at  3500  East  Main
    Street, Farmington, New Mexico (incorporated by reference  to
    Exhibit 10.2 of Form 8-K filed June 2, 2003).

    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.


                              b.    Reports filed on Form  8-K  -
                              During  the quarter ended June  30,
                              2003, the Partnership filed a  Form
                              8-K  dated  June 2, 2003  reporting
                              the   acquisition   of   a   Johnny
                              Carino's  restaurant in Farmington,
                              New Mexico.


                           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:  August 8, 2003        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)