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, 2003

                Commission file number:  0-14264


            AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)


      State of Minnesota                   41-1525197
(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 REAL ESTATE FUND 85-B LIMITED PARTNERSHIP


                              INDEX




PART I.Financial Information

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

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

           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. Changes in Securities

 Item 3. Defaults Upon Senior Securities

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

 Item 5. Other Information

 Item 6. Exhibits and Reports on Form 8-K

         Signatures



<PAGE>
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP

                          BALANCE SHEET

            SEPTEMBER 30, 2003 AND DECEMBER 31, 2002

                           (Unaudited)


                             ASSETS

                                                   2003           2002

CURRENT ASSETS:
  Cash and Cash Equivalents                    $   565,639     $ 1,132,725
  Receivables                                            0          14,117
                                                -----------     -----------
      Total Current Assets                         565,639       1,146,842
                                                -----------     -----------
INVESTMENTS IN REAL ESTATE:
  Land                                             310,044         836,367
  Buildings and Equipment                        1,005,607       1,987,725
  Accumulated Depreciation                        (667,536)     (1,293,593)
                                                -----------     -----------
      Net Investments in Real Estate               648,115       1,530,499
                                                -----------     -----------
          Total Assets                         $ 1,213,754     $ 2,677,341
                                                ===========     ===========


                        LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Payable to AEI Fund Management, Inc.         $     2,224     $     4,989
  Land Remediation Estimate                        211,000         211,000
  Distributions Payable                             46,413         878,036
                                                -----------     -----------
      Total Current Liabilities                    259,637       1,094,025
                                                -----------     -----------
PARTNERS' CAPITAL:
  General Partners                                       0               0
  Limited Partners, $1,000 Unit value;
   7,500 Units authorized and issued;
   6,423 Units outstanding                         954,117       1,583,316
                                                -----------     -----------
      Total Partners' Capital                      954,117       1,583,316
                                                -----------     -----------
       Total Liabilities and Partners' Capital $ 1,213,754     $ 2,677,341
                                                ===========     ===========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP

                       STATEMENT OF INCOME

               FOR THE PERIODS ENDED SEPTEMBER 30

                           (Unaudited)

                                 Three Months Ended        Nine Months Ended
                               9/30/03      9/30/02     9/30/03      9/30/02

RENTAL INCOME                $  29,771     $  39,646   $ 109,313   $ 118,938

EXPENSES:
   Partnership Administration -
     Affiliates                 12,892        17,130      37,786      68,156
   Partnership Administration
     and Property Management -
     Unrelated Parties           4,009         1,081      17,444      15,723
   Depreciation                  6,344         6,580      19,504      19,741
   Real Estate Impairment            0             0      27,888           0
                              ---------     ---------   ---------   ---------
        Total Expenses          23,245        24,791     102,622     103,620
                              ---------     ---------   ---------   ---------

OPERATING INCOME                 6,526        14,855       6,691      15,318
OTHER INCOME:
   Interest Income               1,416         1,144       5,233       3,555
                              ---------     ---------   ---------   ---------
INCOME FROM CONTINUING
   OPERATIONS                    7,942        15,999      11,924      18,873

Income from Discontinued
 Operations                          0        39,196     735,499     111,420
                              ---------     ---------   ---------   ---------
NET INCOME                   $   7,942     $  55,195   $ 747,423   $ 130,293
                              =========     =========   =========   =========

NET INCOME ALLOCATED:
   General Partners          $     498     $   5,552   $  13,766   $  14,303
   Limited Partners              7,444        49,643     733,657     115,990
                              ---------     ---------   ---------   ---------
                             $   7,942     $  55,195   $ 747,423   $ 130,293
                              =========     =========   =========   =========

INCOME PER LIMITED PARTNERSHIP UNIT:
   Continuing Operations     $    1.16     $    2.24   $    1.84   $    2.61
   Discontinued Operations           0          5.49      112.38       15.44
                              ---------     ---------   ---------   ---------
        Total                $    1.16     $    7.73   $  114.22   $   18.05
                              =========     =========   =========   ==========
Weighted Average Units
 Outstanding                     6,423         6,425       6,423       6,425
                              =========     =========   =========   ==========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP

                     STATEMENT OF CASH FLOWS

               FOR THE PERIODS ENDED SEPTEMBER 30

                           (Unaudited)


                                                      2003           2002

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net  Income                                    $   747,423    $   130,293

   Adjustments to Reconcile Net Income to Net Cash
   Provided by Operating Activities:
     Depreciation                                      23,367         42,247
     Real Estate Impairment                            27,888              0
     Gain on Sale of Real Estate                     (709,287)             0
     (Increase) Decrease in Receivables                14,117         (3,121)
     Decrease in Payable to
        AEI Fund Management, Inc.                      (2,765)       (11,433)
     Increase in Unearned Rent                              0          3,333
                                                   -----------    -----------
        Total Adjustments                            (646,680)        31,026
                                                   -----------    -----------
        Net Cash Provided By
           Operating Activities                       100,743        161,319
                                                   -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from Sale of Real Estate                1,540,416              0
                                                   -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase (Decrease) in Distributions Payable      (831,623)           154
   Distributions to Partners                       (1,376,622)      (225,113)
                                                   -----------    -----------
        Net Cash Used For
          Financing Activities                     (2,208,245)      (224,959)
                                                   -----------    -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS            (567,086)       (63,640)

CASH AND CASH EQUIVALENTS, beginning of period      1,132,725        394,793
                                                   -----------    -----------
CASH AND CASH EQUIVALENTS, end of period          $   565,639    $   331,153
                                                   ===========    ===========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND 85-B 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, 2001  $ (16,444)  $ 2,432,031   $ 2,415,587    6,425.16

  Distributions                (2,251)     (222,862)     (225,113)

  Net Income                   14,303       115,990       130,293
                             ---------   -----------   -----------  ----------
BALANCE, September 30, 2002 $  (4,392)  $ 2,325,159   $ 2,320,767    6,425.16
                             =========   ===========   ===========  ==========


BALANCE, December 31, 2002  $       0   $ 1,583,316   $ 1,583,316    6,422.96

  Distributions               (13,766)   (1,362,856)   (1,376,622)

  Net Income                   13,766       733,657       747,423
                             ---------   -----------   -----------  ----------
BALANCE, September 30, 2003 $       0   $   954,117   $   954,117    6,422.96
                             =========   ===========   ===========  ==========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                       SEPTEMBER 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  Real Estate Fund 85-B Limited Partnership (Partnership)
     was  formed  to  acquire and lease commercial properties  to
     operating tenants. The Partnership's operations are  managed
     by  Net  Lease  Management 85-B, Inc.  (NLM),  the  Managing
     General Partner.  Robert P. Johnson, the President and  sole
     shareholder of NLM, serves as the Individual General Partner
     and  an  affiliate of NLM, 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 September 17,  1985  when  minimum
     subscriptions    of   1,300   Limited   Partnership    Units
     ($1,300,000)  were  accepted.  The  offering  terminated  on
     February  4,  1986  when the maximum subscription  limit  of
     7,500  Limited  Partnership Units was  reached.   Under  the
     terms  of  the  Limited Partnership Agreement,  the  Limited
     Partners   and   General  Partners  contributed   funds   of
     $7,500,000 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 REAL ESTATE FUND 85-B LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                       SEPTEMBER 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 6%
     of their Adjusted Capital Contribution per annum, cumulative
     but not compounded, to the extent not previously distributed
     from  Net  Cash Flow; (ii) next, 99% to the Limited Partners
     and  1%  to the General Partners until the Limited  Partners
     receive  an  amount equal to 14% of their  Adjusted  Capital
     Contribution  per annum, cumulative but not  compounded,  to
     the  extent not previously distributed; (iii) next,  to  the
     General  Partners  until  cumulative  distributions  to  the
     General  Partners under Items (ii) and (iii)  equal  15%  of
     cumulative  distributions to all Partners under  Items  (ii)
     and (iii).  Any remaining balance will be distributed 85% to
     the  Limited  Partners  and  15% 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 90%  to
     the  Limited  Partners and 10% to the General Partners.   In
     the  event  no Net Cash Flow is distributed to  the  Limited
     Partners,  90%  of each item of income, gain or  credit  for
     each  respective  year  shall be allocated  to  the  Limited
     Partners,  and 10% of each such item shall be  allocated  to
     the  General Partners.  Net losses from operations  will  be
     allocated 98% to the Limited Partners and 2% 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, 100% to the Limited 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 14% of  their
     Adjusted Capital Contributions per annum, cumulative but not
     compounded,  to  the extent not previously allocated;  (iii)
     third,  to the General Partners until cumulative allocations
     to the General Partners equal 15% of cumulative allocations.
     Any  remaining balance will be allocated 85% to the  Limited
     Partners  and 15% to the General Partners.  Losses  will  be
     allocated 98% to the Limited Partners and 2% to the  General
     Partners.

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


          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                       SEPTEMBER 30, 2003
                                 (Continued)

(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.

     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  30
     years and 10 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.


(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.


          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                       SEPTEMBER 30, 2003
                           (Continued)

(5)  Investments in Real Estate -

     The  Partnership  leases its properties to  various  tenants
     through triple net leases, which are classified as operating
     leases.  Under a triple net lease, the lessee is responsible
     for  all  real estate taxes, insurance, maintenance, repairs
     and  operating  expenses of the property.   Certain  lessees
     have  been  granted options to purchase the  property  at  a
     formula  price.  In many of the leases, the option price  is
     stated  to  be  the greater of the price determined  by  the
     stated  formula or the fair market value of the property  as
     agreed   upon  by  the  parties  or  determined   based   on
     appraisals.  In general, the formula price is determined  in
     one  of two ways.  Under the first, the option price is  the
     original  purchase  price  of the property  increased  by  a
     specified  percentage per year, compounded annually.   Under
     the  second, the option price is determined by dividing  the
     annual rent at the time the purchase option is exercised  by
     a  percentage.  Based on the scheduled annual rent under the
     lease,  the  resulting option price would always be  greater
     than the original purchase price.  The actual sale price  of
     a  property to a lessee may or may not exceed original  cost
     depending on market and other conditions.

     In  June 2003, the Partnership received a verbal offer  from
     the lessee to buy the Arby's restaurant in Colorado Springs,
     Colorado  for $200,000.  In the second quarter  of  2003,  a
     charge  to operations for real estate impairment of  $27,888
     was  recognized, which was the difference between  the  book
     value  at  June  30, 2003 of $222,888 and the estimated  net
     sale  proceeds of $195,000.  The charge was recorded against
     the cost of the land and building.

     Subsequently,  the  lessee closed  the  restaurant,  stopped
     making  rent payments and broke off communications with  the
     Partnership.   Through September 30, 2003, the  lessee  owed
     $10,000 for past due rent, which has not been accrued.   The
     Partnership commenced a legal action against the  lessee  to
     recover  all amounts due under the Lease.  The property  has
     been  listed  for  sale or lease with a  local  real  estate
     broker.   While  the property is vacant, the Partnership  is
     responsible  for real estate taxes and other costs  required
     to maintain the property.


(6)  Payable to AEI Fund Management -

     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 REAL ESTATE FUND 85-B LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                       SEPTEMBER 30, 2003
                           (Continued)

(7)  Discontinued Operations -

     In  1996,  in  anticipation of selling a  property  in  Park
     Forest, Illinois, the Partnership conducted an environmental
     soil  contamination  investigation  of  the  property.   The
     investigation revealed contamination of approximately  2,750
     cubic  yards  exceeding Tier 1 soil migration  to  Class  II
     groundwater,   which  will  need  to  be  remediated.    The
     contamination has been identified as petroleum  constituents
     and  is  believed to have been caused by underground storage
     tanks  in place when the property was operated as a gasoline
     station,  prior to the Partnership's ownership.  In  October
     1996,  an estimate for site remediation work, which included
     soil  removal, tank removal, soil sampling, backfilling  and
     reporting,  of  $211,000 was received from an  environmental
     engineering firm. It is reasonably possible that the  actual
     costs could materially differ from the estimate.  It has not
     been  determined when the reclamation work will  begin,  how
     long  it  will  take to complete or whether  there  are  any
     sources  available  for indemnification of  the  reclamation
     costs.     On  August  5,  1998, the  Partnership  sold  the
     property  to  the tenant.  The Partnership is reviewing  its
     legal  obligation  for  the  site  liability  and  may  have
     adjustments to the accrued liability in future periods.

     In  May 2001, Huntington Restaurants Group, Inc. (HRG),  the
     lessee  of  the  Denny's restaurant  in  Fort  Worth,  Texas
     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.    On
     December 31, 2001, the Lease expired and was not renewed  by
     the  lessee. Through December 31, 2001, HRG owed $25,117 for
     past due rent, which was not accrued for financial reporting
     purposes.   In  the fourth quarter of 2001, the  Partnership
     incurred $27,410 of real estate tax expense related to  2001
     taxes  due  on  the  property.  Due to  the  uncertainty  of
     collection, the Partnership expensed these taxes, which  are
     normally  the  responsibility of the  lessee.   In  December
     2002,  in  exchange for a payment of $14,067 from  HRG,  the
     Partnership  agreed to forgive the balance of the  past  due
     rent  and real estate taxes.  While the property was vacant,
     the  Partnership was responsible for real estate  taxes  and
     other costs required to maintain the property.

     In  December 2001, the Partnership received an offer to  buy
     the  restaurant for $625,000 from an unrelated third  party.
     In  the  fourth quarter of 2001, a charge to operations  for
     real estate impairment of $140,337 was recognized, which was
     the  difference between the book value at December 31,  2001
     of $715,337 and the estimated net sale proceeds of $575,000.
     The  charge  was recorded against the cost of the  land  and
     building.   On  November 5, 2002, the sale closed  with  the
     Partnership receiving net sale proceeds of $582,182 for  the
     property, which resulted in a net gain of $7,182.

     In August 2002, the Partnership entered into an Agreement to
     sell  the All Tune and Lube in Merrillville, Indiana  to  an
     unrelated third party.  On October 28, 2002, the sale closed
     with   the  Partnership  receiving  net  sale  proceeds   of
     $238,879, which resulted in a net gain of $59,384.   At  the
     time  of sale, the cost and related accumulated depreciation
     was $304,432 and $124,937, respectively.



          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                       SEPTEMBER 30, 2003
                           (Continued)

(7)  Discontinued Operations - (Continued)

     On  February  25, 2003, the Partnership sold  the  Cheddar's
     restaurant  to an affiliate of the tenant.  The  Partnership
     received net sale proceeds of $1,540,416, which resulted  in
     a  net gain of $709,287.  At the time of the sale, the  cost
     and  related  accumulated depreciation  was  $1,480,553  and
     $649,424, respectively.

     In  December  2002, the Partnership distributed $808,081  of
     net sale proceeds to the Limited and General Partners, which
     represented  a  return  of capital of  $124.55  per  Limited
     Partnership   Unit.    In   March  2003,   the   Partnership
     distributed  $1,212,121 of net sale proceeds to the  Limited
     and  General Partners, which represented a return of capital
     of  $186.83 per Limited Partnership Unit.  The remaining net
     sale  proceeds  will be distributed to the Partners  in  the
     future.

     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       Nine Months Ended
                                9/30/03      9/30/02     9/30/03      9/30/02

Rental Income                   $     0    $ 57,720    $  29,857    $ 173,160
Property Management Expenses          0     (11,022)         218      (39,234)
Depreciation                          0      (7,502)      (3,863)     (22,506)
Gain on Disposal of Real Estate       0           0      709,287            0
                                 --------   ---------   ---------    ---------
 Income from Discontinued
   Operations                   $     0    $ 39,196    $ 735,499    $ 111,420
                                 ========   =========   =========    =========


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;


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

      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.

        The  Partnership accrues a liability for land remediation
costs  when  information obtained by the Partnership, through  an
environmental  study, indicates it is possible that  a  liability
has  been  incurred  and  the amount  of  the  liability  can  be
reasonably   estimated.   Future  environmental  study   results,
changes  in the party responsible for the liability, or estimates
of  actual  clean-up costs could cause material  changes  in  the
liability accrued.

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

Results of Operations

       For the nine months ended September 30, 2003 and 2002, the
Partnership  recognized rental income from continuing  operations
of  $109,313 and $118,938, respectively.  In 2003, rental  income
decreased  due  to  unpaid  rent from the  Arby's  restaurant  in
Colorado Springs, Colorado.

       For the nine months ended September 30, 2003 and 2002, the
Partnership  incurred  Partnership administration  expenses  from
affiliated  parties of $37,786 and $68,156, respectively.   These
administration  expenses  include  costs  associated   with   the
management of the properties, processing distributions, reporting
requirements and correspondence to the Limited Partners.  As  the
Partnership's asset base decreases due to property sales,  it  is
allocated a smaller share of expenses that are allocated  by  AEI
Fund  Management, Inc. based on the relative assets of the  funds
under  management.  During  the  same  periods,  the  Partnership
incurred   Partnership  administration  and  property  management
expenses   from  unrelated  parties  of  $17,444   and   $15,723,
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.

       In June 2003, the Partnership received a verbal offer from
the  lessee  to  buy  the Arby's restaurant in Colorado  Springs,
Colorado  for $200,000.  In the second quarter of 2003, a  charge
to   operations  for  real  estate  impairment  of  $27,888   was
recognized,  which was the difference between the book  value  at
June 30, 2003 of $222,888 and the estimated net sale proceeds  of
$195,000.  The charge was recorded against the cost of  the  land
and building.

        Subsequently,  the lessee closed the restaurant,  stopped
making  rent  payments  and  broke off  communications  with  the
Partnership.  Through September 30, 2003, the lessee owed $10,000
for  past  due rent, which has not been accrued.  The Partnership
commenced  a  legal  action against the  lessee  to  recover  all
amounts  due under the Lease.  The property has been  listed  for
sale  or  lease  with  a  local real estate  broker.   While  the
property  is  vacant,  the Partnership is  responsible  for  real
estate taxes and other costs required to maintain the property.

       For the nine months ended September 30, 2003 and 2002, the
Partnership  recognized interest income  of  $5,233  and  $3,555,
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.
For  the  nine  months ended September 30, 2003, the  Partnership
recognized  income  from  discontinued  operations  of  $735,499,
representing rental income less property management expenses  and
depreciation  of $26,212 and gain on disposal of real  estate  of
$709,287.   For  the nine months ended September  30,  2002,  the
Partnership  recognized  income from discontinued  operations  of
$111,420,  representing  rental income less  property  management
expenses and depreciation.


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

        In  1996, in anticipation of selling a property  in  Park
Forest, Illinois, the Partnership conducted an environmental soil
contamination  investigation of the property.  The  investigation
revealed   contamination  of  approximately  2,750  cubic   yards
exceeding  Tier  1 soil migration to Class II groundwater,  which
will   need  to  be  remediated.   The  contamination  has   been
identified as petroleum constituents and is believed to have been
caused  by  underground storage tanks in place when the  property
was  operated  as a gasoline station, prior to the  Partnership's
ownership.   In  October 1996, an estimate for  site  remediation
work,  which included soil removal, tank removal, soil  sampling,
backfilling  and  reporting, of $211,000  was  received  from  an
environmental  engineering firm.  It is reasonably possible  that
the  actual costs could materially differ from the estimate.   It
has not been determined when the reclamation work will begin, how
long  it  will take to complete or whether there are any  sources
available  for  indemnification of  the  reclamation  costs.   On
August  5, 1998, the Partnership sold the property to the tenant.
The  Partnership is reviewing its legal obligation for  the  site
liability  and may have adjustments to the accrued  liability  in
future periods.

       In May 2001, Huntington Restaurants Group, Inc. (HRG), the
lessee  of  the Denny's restaurant in Fort Worth, Texas  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.  On December 31, 2001, the Lease  expired
and was not renewed by the lessee. Through December 31, 2001, HRG
owed  $25,117  for  past  due rent, which  was  not  accrued  for
financial reporting purposes.  In the fourth quarter of 2001, the
Partnership  incurred $27,410 of real estate tax expense  related
to  2001  taxes  due on the property.  Due to the uncertainty  of
collection,  the  Partnership expensed  these  taxes,  which  are
normally the responsibility of the lessee.  In December 2002,  in
exchange  for  a  payment of $14,067 from  HRG,  the  Partnership
agreed  to  forgive  the balance of the past due  rent  and  real
estate taxes.  While the property was vacant, the Partnership was
responsible  for  real estate taxes and other costs  required  to
maintain the property.

       In December 2001, the Partnership received an offer to buy
the  restaurant for $625,000 from an unrelated third  party.   In
the  fourth  quarter  of 2001, a charge to  operations  for  real
estate  impairment  of  $140,337 was recognized,  which  was  the
difference  between  the  book value  at  December  31,  2001  of
$715,337  and  the estimated net sale proceeds of $575,000.   The
charge  was  recorded against the cost of the land and  building.
At  December  31, 2001, the land and building were classified  as
Real  Estate Held for Sale.  On November 5, 2002, the sale closed
with the Partnership receiving net sale proceeds of $582,182  for
the property, which resulted in a net gain of $7,182.

        In August 2002, the Partnership entered into an Agreement
to  sell  the  All Tune and Lube in Merrillville, Indiana  to  an
unrelated third party.  On October 28, 2002, the sale closed with
the  Partnership  receiving net sale proceeds of $238,879,  which
resulted in a net gain of $59,384.  At the time of sale, the cost
and  related accumulated depreciation was $304,432 and  $124,937,
respectively.

        On  February 25, 2003, the Partnership sold the Cheddar's
restaurant  to  an  affiliate  of the  tenant.   The  Partnership
received net sale proceeds of $1,540,416, which resulted in a net
gain  of $709,287.  At the time of the sale, the cost and related
accumulated    depreciation   was   $1,480,553   and    $649,424,
respectively.


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

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

Liquidity and Capital Resources

        During  the  nine months ended September  30,  2003,  the
Partnership's cash balances decreased $567,086 mainly as a result
of  cash  distributions of net sale proceeds paid to the Partners
in  excess of cash generated from the sale of property during the
period.   During the nine months ended September  30,  2002,  the
Partnership's cash balances decreased $63,640 as the  Partnership
distributed  more  cash to the Partners than  it  generated  from
operating activities.

        Net  cash provided by operating activities decreased from
$161,319 in 2002 to $100,743 in 2003 as a result of a decrease in
total  rental  and interest income in 2003, which  was  partially
offset  by  a decrease in Partnership administration expenses  in
2003  and  net timing differences in the collection  of  payments
from the lessees and the payment of expenses.

        During  the  nine months ended September  30,  2003,  the
Partnership generated cash flow from the sale of real  estate  of
$1,540,416.

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

       For the nine months ended September 30, 2003 and 2002, the
Partnership  declared distributions of $1,376,622  and  $225,113,
respectively, which were distributed 99% to the Limited  Partners
and  1%  to the General Partners.  The Limited Partners  received
distributions of $1,362,856 and $222,862 and the General Partners
received  distributions of $13,766 and $2,251  for  the  periods,
respectively.

        In December 2002, the Partnership distributed $808,081 of
net  sale  proceeds  to the Limited and General  Partners,  which
represented   a  return  of  capital  of  $124.55   per   Limited
Partnership  Unit.   In  March 2003, the Partnership  distributed
$1,212,121  of  net  sale  proceeds to the  Limited  and  General
Partners,  which represented a return of capital of  $186.83  per
Limited  Partnership Unit.  The remaining net sale proceeds  will
be 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 is not obligated  to
purchase  in  any  year  more than 5%  of  the  number  of  Units
originally sold.  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.

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

       During 2003, the Partnership did not redeem any Units from
the  Limited  Partners.  In prior years, a total of  104  Limited
Partners  redeemed 1,077.04 Partnership Units for $728,700.   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 and  the  Partnership's
cash reserve, should be adequate to fund continuing distributions
and  meet  other Partnership obligations, including the potential
obligations associated with remediation of contaminated  soil  at
the  property in Park Forest, Illinois, 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.



                   PART II - OTHER INFORMATION
                           (Continued)

ITEM 5.OTHER INFORMATION

      None.

ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K

       a. Exhibits -
                             Description

    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 - None.



                           SIGNATURES

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


Dated:  November 11, 2003     AEI Real Estate Fund 85-B
                              Limited Partnership
                              By: Net Lease Management  85-B, 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)