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, 2004

                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




PART I. Financial Information

 Item 1. Balance Sheet as of September 30, 2004 and December 31, 2003

          Statements for the Periods ended September 30, 2004  and 2003:

           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, 2004 AND DECEMBER 31, 2003

                           (Unaudited)

                             ASSETS

                                                  2004             2003
CURRENT ASSETS:
  Cash and Cash Equivalents                   $ 2,536,063      $ 6,018,352
  Receivables                                      26,045              579
                                               -----------      -----------
      Total Current Assets                      2,562,108        6,018,931
                                               -----------      -----------
INVESTMENTS IN REAL ESTATE:
  Land                                          5,556,728        4,770,063
  Buildings and Equipment                      10,187,122       10,063,261
  Accumulated Depreciation                     (1,089,819)        (862,718)
                                               -----------      -----------
                                               14,654,031       13,970,606
  Real Estate Held for Sale                     2,107,185          264,200
                                               -----------      -----------
      Net Investments in Real Estate           16,761,216       14,234,806
                                               -----------      -----------
          Total Assets                        $19,323,324      $20,253,737
                                               ===========      ===========


                LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Payable to AEI Fund Management, Inc.        $    33,849       $  160,512
  Distributions Payable                           405,911          951,129
  Unearned Rent                                    12,769                0
                                               -----------       -----------
      Total Current Liabilities                   452,529        1,111,641
                                               -----------       -----------
PARTNERS' CAPITAL:
  General Partners                                 26,275           28,987
  Limited Partners, $1,000 per Unit;
   24,000 Units authorized and issued;
   22,907 Units outstanding                    18,844,520       19,113,109
                                               -----------      -----------
      Total Partners' Capital                  18,870,795       19,142,096
                                               -----------      -----------
       Total Liabilities and Partners'Capital $19,323,324      $20,253,737
                                               ===========      ===========

 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
                             9/30/04       9/30/03     9/30/04       9/30/03

RENTAL INCOME              $  335,232   $   218,463  $   981,450   $  646,145

EXPENSES:
   Partnership Administration -
     Affiliates                53,563        60,314      162,083      167,388
   Partnership Administration
     and Property Management -
     Unrelated Parties          9,112         3,448       27,110       19,102
   Depreciation                94,720        61,985      276,080      181,427
                            ----------   -----------  -----------   ----------
     Total Expenses           157,395       125,747      465,273      367,917
                            ----------   -----------  -----------   ----------

OPERATING INCOME              177,837        92,716      516,177      278,228

OTHER INCOME:
   Interest Income             11,836        13,512       36,011       68,062
   Gain on Sale of Real Estate      0             0      137,068            0
                            ----------   -----------  -----------   ----------
        Total Other Income     11,836        13,512      173,079       68,062
                            ----------   -----------  -----------   ----------
INCOME FROM CONTINUING
   OPERATIONS                 189,673       106,228      689,256      346,290

Income from
  Discontinued Operations      57,328       684,162      266,721    1,422,125
                            ----------   -----------  -----------   ----------
NET INCOME                 $  247,001   $   790,390  $   955,977   $1,768,415
                            ==========   ===========  ===========   ==========
NET INCOME ALLOCATED:
   General Partners        $    2,470   $     7,904  $     9,560   $   17,684
   Limited Partners           244,531       782,486      946,417    1,750,731
                            ----------   -----------  -----------   ----------
                           $  247,001   $   790,390  $   955,977   $1,768,415
                            ==========   ===========  ===========   ==========
INCOME PER LIMITED PARTNERSHIP UNIT:
   Continuing Operations   $     8.19   $      4.57  $     29.79   $    14.89
   Discontinued Operations       2.48         29.41        11.53        61.15
                            ----------   -----------  -----------   ----------
        Total              $    10.67   $     33.98  $     41.32   $    76.04
                            ==========   ===========  ===========   ==========
Weighted Average
  Units Outstanding            22,907        23,025       22,907       23,025
                            ==========   ===========  ===========   ==========

 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)

                                                       2004            2003
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net  Income                                    $   955,977     $ 1,768,415

   Adjustments to Reconcile Net Income to Net Cash
   Provided by Operating Activities:
     Depreciation                                     311,230         312,160
     Gain on Sale of Real Estate                     (265,704)       (993,576)
     (Increase) Decrease in Receivables               (25,466)         15,194
     Increase (Decrease) in Payable to
        AEI Fund Management, Inc.                    (126,663)         40,946
     Increase in Unearned Rent                         12,769          26,541
                                                   -----------     -----------
        Total Adjustments                             (93,834)       (598,735)
                                                   -----------     -----------
        Net Cash Provided By
           Operating Activities                       862,143       1,169,680
                                                   -----------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Investments in Real Estate                      (3,839,008)     (3,044,950)
   Proceeds from Sale of Real Estate                1,267,072       3,395,778
                                                   -----------     -----------
        Net Cash Provided By (Used For)
         Investing  Activities                     (2,571,936)        350,828
                                                   -----------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Decrease in Distributions Payable                 (545,218)       (242,423)
   Distributions to Partners                       (1,227,278)     (1,227,282)
                                                   -----------     -----------
        Net Cash Used For
         Financing  Activities                     (1,772,496)     (1,469,705)
                                                   -----------     -----------
NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                            (3,482,289)         50,803

CASH AND CASH EQUIVALENTS, beginning of period      6,018,352       4,653,629
                                                   -----------     -----------
CASH AND CASH EQUIVALENTS, end of period          $ 2,536,063     $ 4,704,432
                                                   ===========     ===========

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

  Distributions              (12,273)    (1,215,009)   (1,227,282)

  Net Income                  17,684      1,750,731     1,768,415
                             --------    -----------   -----------  ----------
BALANCE, September 30, 2003 $ 23,365    $18,556,608   $18,579,973   23,025.33
                             ========    ===========   ===========  ==========


BALANCE, December 31, 2003  $ 28,987    $19,113,109   $19,142,096   22,907.49

  Distributions              (12,272)    (1,215,006)   (1,227,278)

  Net Income                   9,560        946,417       955,977
                             --------    -----------   -----------  ----------
BALANCE, September 30, 2004 $ 26,275    $18,844,520   $18,870,795   22,907.49
                             ========    ===========   ===========  ==========

 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, 2004

                           (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  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
                           (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 2004 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 -

     On  September  19,  2003, the Partnership  purchased  a  37%
     interest  in a Winn-Dixie store in Panama City, Florida  for
     $1,714,965.    The   property  is   leased   to   Winn-Dixie
     Montgomery, Inc. under a Lease Agreement with a primary term
     of  20  years  and annual rental payments of $138,380.   The
     remaining  interests in the property were purchased  by  AEI
     Net  Lease Income & Growth Fund XIX Limited Partnership  and
     AEI   Income  &  Growth  Fund  24  LLC,  affiliates  of  the
     Partnership.

     Through March 31, 2004, the Partnership sold 16.5975% of the
     Winn-Dixie  store in Panama City, Florida, in four  separate
     transactions,  to unrelated third parties.  The  Partnership
     received net sale proceeds of $900,843, which resulted in  a
     net  gain  of  $139,707.  The cost and  related  accumulated
     depreciation of the interests sold was $769,300 and  $8,164,
     respectively.  For the nine months ended September 30,  2004
     and 2003, the net gain was $137,068 and $-0-, respectively.

     On  December  30, 2003, the Partnership purchased  a  Johnny
     Carino's  restaurant in Laredo, Texas for  $2,605,079.   The
     property  is leased to Kona Restaurant Group, Inc.  under  a
     Lease  Agreement with a primary term of 13 years and  annual
     rental payments of $215,646.

     On  February  9,  2004,  the  Partnership  purchased  a  50%
     interest  in a Jared Jewelry store in Hanover, Maryland  for
     $1,984,828.   The  property is leased to  Sterling  Jewelers
     Inc. under a Lease Agreement with a primary term of 20 years
     and  annual  rental  payments of  $153,228.   The  remaining
     interest  in  the property was purchased by  AEI  Net  Lease
     Income & Growth Fund XX Limited Partnership, an affiliate of
     the Partnership.

     In  March 2004, the Partnership entered into an agreement to
     purchase  a 50% interest in an Eckerd drug store in Buffalo,
     New  York  for  approximately $1,606,500.  In May  2004,  by
     mutual   agreement  of  the  parties,  the   agreement   was
     terminated.

     On  September  20,  2004, the Partnership  purchased  a  40%
     interest  in  an Eckerd drug store in Utica,  New  York  for
     $1,843,884.   The  property is leased to Eckerd  Corporation
     under a Lease Agreement with a primary term of 20 years  and
     annual  rental payments of $149,671.  The remaining interest
     in  the  property  was purchased by AEI Accredited  Investor
     Fund   2002  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.

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

(6)  Discontinued Operations -

     During  the first nine months of 2003, the Partnership  sold
     the  Children's  World  in  Mundelein,  Illinois,  in  seven
     separate  transactions,  to unrelated  third  parties.   The
     Partnership  received total net sale proceeds of $2,010,839,
     which  resulted in a net gain of $495,127.  The  total  cost
     and  related accumulated depreciation of the interests  sold
     was $1,618,824 and $103,112, respectively.

     During  the third quarter of 2003, the Partnership sold  its
     25%   interest  in  the  Champps  Americana  restaurant   in
     Centerville,   Ohio,  in  five  separate  transactions,   to
     unrelated third parties.  The Partnership received total net
     sale proceeds of $1,384,939, which resulted in a net gain of
     $498,449.    The   total   cost  and   related   accumulated
     depreciation of the interests sold was $984,426 and $97,936,
     respectively.

     During  the  fourth  quarter of 2003, the  Partnership  sold
     37.0128%  of  the  Garden Ridge retail store  in  Pineville,
     North   Carolina,   in  eleven  separate  transactions,   to
     unrelated third parties.  The Partnership received total net
     sale proceeds of $3,968,116, which resulted in a net gain of
     $1,347,739.    The   total  cost  and  related   accumulated
     depreciation  of  the  interests  sold  was  $3,310,163  and
     $689,786, respectively.

     On  January  13,  2004, the Partnership sold  its  remaining
     3.7372%  interest  in the Garden Ridge retail  store  to  an
     unrelated  third party.  The Partnership received  net  sale
     proceeds  of  $392,836, which resulted  in  a  net  gain  of
     $128,636.  At December 31, 2003, the property was classified
     as Real Estate Held for Sale with a book value of $264,200.

     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.

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

(6)  Discontinued Operations - (Continued)

     In  June 2004, the Partnership entered into an agreement  to
     sell  the  Johnny  Carino's restaurant  in  Farmington,  New
     Mexico to an unrelated third party.  Subsequent to September
     30, 2004, the sale closed with the Partnership receiving net
     sale proceeds of approximately $2,900,000, which resulted in
     a  net  gain  of  approximately $793,000.  At September  30,
     2004,  the property was classified as Real Estate  Held  for
     Sale with a book value of $2,107,185.

     During  the  first  nine  months  of  2004  and  2003,   the
     Partnership  distributed $225,776 and $140,284 of  net  sale
     proceeds  to  the Limited and General Partners  as  part  of
     their quarterly distributions, which represented a return of
     capital  of  $9.76  and $6.04 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
                            9/30/04       9/30/03    9/30/04       9/30/03

Rental Income              $   57,750   $  177,097   $  174,504    $  566,330
Property Management Expenses     (422)      (4,016)      (1,269)       (7,048)
Depreciation                        0      (44,582)     (35,150)     (130,733)
Gain on Disposal of Real Estate     0      555,663      128,636       993,576
                            ----------   ----------   ----------    ----------
 Income from
   Discontinued Operations $   57,328   $  684,162   $  266,721    $1,422,125
                            ==========   ==========   ==========    ==========


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.



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, 2004 and 2003, the
Partnership  recognized rental income from continuing  operations
of  $981,450 and $646,145, respectively.  In 2004, rental  income
increased  as  a  result of additional rent  received  from  four
property acquisitions in 2003 and 2004 and rent increases on  two
properties.

       For the nine months ended September 30, 2004 and 2003, the
Partnership  incurred  Partnership administration  expenses  from
affiliated parties of $162,083 and $167,388, 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  $27,110 and $19,102, 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.

       For the nine months ended September 30, 2004 and 2003, the
Partnership  recognized interest income of $36,011  and  $68,062,
respectively.   In  2004, interest income decreased  due  to  the
Partnership  receiving  interest from  construction  advances  in
2003.

        For  the  nine  months  ended  September  30,  2004,  the
Partnership   recognized  gain  on  sale  of  real  estate   from
continuing operations of $137,068 from the sale of the Winn-Dixie
store.   Since the Partnership retains an ownership  interest  in
the  property,  the operating results and gain  on  sale  of  the
property were not classified as discontinued operations.

        Through March 31, 2004, the Partnership sold 16.5975%  of
the  Winn-Dixie store in Panama City, Florida, in  four  separate
transactions,  to  unrelated  third  parties.   The   Partnership
received net sale proceeds of $900,843, which resulted in  a  net
gain  of $139,707.  The cost and related accumulated depreciation
of the interests sold was $769,300 and $8,164, respectively.  For
the  nine months ended September 30, 2004 and 2003, the net  gain
was $137,068 and $-0-, respectively.


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, 2004, the  Partnership
recognized  income  from  discontinued  operations  of  $266,721,
representing rental income less property management expenses  and
depreciation of $138,085 and gain on disposal of real  estate  of
$128,636.   For  the nine months ended September  30,  2003,  the
Partnership  recognized  income from discontinued  operations  of
$1,422,125,  representing rental income less property  management
expenses  and  depreciation of $428,549 and gain on  disposal  of
real estate of $993,576.

       During the first nine months of 2003, the Partnership sold
the  Children's  World in Mundelein, Illinois, in seven  separate
transactions,  to  unrelated  third  parties.   The   Partnership
received total net sale proceeds of $2,010,839, which resulted in
a  net  gain of $495,127.  The total cost and related accumulated
depreciation  of the interests sold was $1,618,824 and  $103,112,
respectively.

       During the third quarter of 2003, the Partnership sold its
25.0%   interest   in   the  Champps  Americana   restaurant   in
Centerville,  Ohio, in five separate transactions,  to  unrelated
third  parties.  The Partnership received total net sale proceeds
of  $1,384,939,  which resulted in a net gain of  $498,449.   The
total  cost and related accumulated depreciation of the interests
sold was $984,426 and $97,936, respectively.

        During  the fourth quarter of 2003, the Partnership  sold
37.0128%  of  the  Garden Ridge retail store in Pineville,  North
Carolina,  in  eleven separate transactions, to  unrelated  third
parties.   The  Partnership received total net sale  proceeds  of
$3,968,116,  which  resulted in a net gain  of  $1,347,739.   The
total  cost and related accumulated depreciation of the interests
sold was $3,310,163 and $689,786, respectively.

        On  January 13, 2004, the Partnership sold its  remaining
3.7372% interest in the Garden Ridge retail store to an unrelated
third  party.   The  Partnership received net  sale  proceeds  of
$392,836, which resulted in a net gain of $128,636.  At  December
31,  2003,  the property was classified as Real Estate  Held  for
Sale with a book value of $264,200.

       In June 2004, the Partnership entered into an agreement to
sell the Johnny Carino's restaurant in Farmington, New Mexico  to
an  unrelated third party.  Subsequent to September 30, 2004, the
sale  closed with the Partnership receiving net sale proceeds  of
approximately  $2,900,000,  which  resulted  in  a  net  gain  of
approximately $793,000.  At September 30, 2004, the property  was
classified  as  Real Estate Held for Sale with a  book  value  of
$2,107,185.

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

        In  2003  and the first quarter of 2004, the  Partnership
realized significant gains from the sale of property.  While  the
real  estate market is expected to remain attractive for  sellers
of  property, there can be no assurance the Partnership  will  be
able  to  achieve  a  similar level of sales  activity  or  sales
profitability  during  the remainder of 2004  due  to  unforeseen
changes  in the real estate market.   In addition, it  is  likely
the  Partnership  will  curtail its selling  activity  as  it  is
becoming  more difficult to find attractive property in which  to
reinvest the proceeds from property sales.

        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,  2004,  the
Partnership's cash balances decreased $3,482,289 as a  result  of
cash  used  to purchase property and distributions  paid  to  the
Partners  in  excess of cash generated from operating activities,
which  were partially offset by cash generated from the  sale  of
property.   During the nine months ended September 30, 2003,  the
Partnership's cash balances increased $50,803 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
$1,169,680 in 2003 to $862,143 in 2004 as a result of a  decrease
in  total  rental  and  interest income in 2004  and  net  timing
differences  in the collection of payments from the  lessees  and
the payment of expenses.

        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, 2004 and 2003, the Partnership generated cash  flow
from  the  sale  of  real  estate of $1,267,072  and  $3,395,778,
respectively.  During the same periods, the Partnership  expended
$3,839,008  and  $3,044,950,  respectively,  to  invest  in  real
properties (inclusive of acquisition expenses) as the Partnership
reinvested cash generated from property sales.


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

       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.

        On  September 19, 2003, the Partnership purchased  a  37%
interest  in  a  Winn-Dixie  store in Panama  City,  Florida  for
$1,714,965.   The  property is leased to  Winn-Dixie  Montgomery,
Inc. under a Lease Agreement with a primary term of 20 years  and
annual  rental payments of $138,380.  The remaining interests  in
the property were purchased by AEI Net Lease Income & Growth Fund
XIX  Limited  Partnership and AEI Income & Growth  Fund  24  LLC,
affiliates of the Partnership.

        On  December 30, 2003, the Partnership purchased a Johnny
Carino's  restaurant  in  Laredo,  Texas  for  $2,605,079.    The
property is leased to Kona Restaurant Group, Inc. under  a  Lease
Agreement  with  a  primary term of 13 years  and  annual  rental
payments of $215,646.

        On  February  9,  2004, the Partnership purchased  a  50%
interest  in  a  Jared  Jewelry store in  Hanover,  Maryland  for
$1,984,828.   The  property is leased to Sterling  Jewelers  Inc.
under  a  Lease  Agreement with a primary term of  20  years  and
annual  rental payments of $153,228.  The remaining  interest  in
the  property was purchased by AEI Net Lease Income & Growth Fund
XX Limited Partnership, an affiliate of the Partnership.

        On  September 20, 2004, the Partnership purchased  a  40%
interest  in  an  Eckerd  drug  store  in  Utica,  New  York  for
$1,843,884.  The property is leased to Eckerd Corporation under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $149,671.  The remaining interest in the property was
purchased   by   AEI  Accredited  Investor  Fund   2002   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, 2004 and 2003, the
Partnership  declared distributions of $1,227,278 and $1,227,282,
respectively, which were distributed 99% to the Limited  Partners
and  1%  to the General Partners.  The Limited Partners  received
distributions  of  $1,215,006  and  $1,215,009  and  the  General
Partners  received distributions of $12,272 and $12,273  for  the
periods,   respectively.   In  December  2003,  the   Partnership
declared  a bonus distribution of $545,455 of net sale  proceeds,
which  resulted in a higher distribution payable at December  31,
2003.

        During  the  first  nine months of  2004  and  2003,  the
Partnership  distributed  $225,776  and  $140,284  of  net   sale
proceeds  to  the Limited and General Partners as part  of  their
quarterly distributions, which represented a return of capital of
$9.76 and $6.04 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, 2004, seven Limited Partners  redeemed  a
total  of 96.24 Partnership Units for $59,064 in accordance  with
the  Partnership  Agreement.  On October 1, 2003,  eight  Limited
Partners  redeemed  a  total  of  117.84  Partnership  Units  for
$81,076.   The  Partnership acquired these Units using  Net  Cash
Flow  from  operations.  In prior years, a total  of  41  Limited
Partners  redeemed  974.67 Partnership Units for  $804,867.   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 $597 and  $819  in  2004  and
2003, respectively.

       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.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.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

      None.
                    PART II - OTHER INFORMATION
                           (Continued)

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

      None

ITEM 5.OTHER INFORMATION

      None.

ITEM 6.EXHIBITS

    10.1  Assignment of Purchase Agreement dated August 16,  2004
    between  the Partnership, AEI Accredited Investor  Fund  2002
    Limited  Partnership and AEI Fund Management,  Inc.  relating
    to the Property at 121 Herkimer Road, Utica, New York.

    10.2  Assignment and Assumption of Lease dated September  20,
    2004  between  the Partnership, AEI Accredited Investor  Fund
    2002  Limited  Partnership  and Herkimer  Rd.  &  Euclid  Rd.
    Development,  LLC relating to the Property  at  121  Herkimer
    Road, Utica, New York.

    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 10, 2004     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)