SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549
                                
                           FORM 10-QSB
                                
           Quarterly Report Under Section 13 or 15(d)
             of The Securities Exchange Act of 1934
                                
           For the Quarter Ended:  September 30, 1996
                                
                Commission file number:  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.)


  1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
            (Address of Principal Executive Offices)
                                
                         (612) 227-7333
                   (Issuer's telephone number)
                                
                                
                         Not Applicable
 (Former name, former address and former fiscal year, if changed
                       since last report)
                                
Check  whether  the issuer (1) filed all reports required  to  be
filed  by Section 13 or 15(d) of the Securities Exchange  Act  of
1934  during the preceding 12 months (or for such shorter  period
that  the registrant was required to file such reports), and  (2)
has  been  subject to such filing requirements for  the  past  90
days.

                        Yes  [X]     No
                                
         Transitional Small Business Disclosure Format:
                                
                        Yes          No   [X]
                                
                                
                                
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                                
                              INDEX
                                
                                
                                                     

PART I. Financial Information

 Item 1. Balance Sheet as of September 30, 1996 and December 31, 1995

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

            Income                                     
 
            Cash Flows                                 

            Changes in Partners' Capital               

          Notes to Financial Statements               

 Item 2.  Management's Discussion and Analysis    

PART II.  Other Information

 Item 1.  Legal Proceedings                          

 Item 2.  Changes in Securities                      

 Item 3.  Defaults Upon Senior Securities            

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

 Item 5.  Other Information                          

 Item 6.  Exhibits and Reports on Form 8-K           


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

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

                                                        1996         1995

CURRENT ASSETS:
   Cash and Cash Equivalents                        $   346,655   $   302,614
   Receivables                                                0            49
                                                     -----------   -----------
             Total Current Assets                       346,655       302,663
                                                     -----------   -----------
INVESTMENTS IN REAL ESTATE:
   Land                                               1,667,493     1,667,493
   Buildings and Equipment                            3,000,246     3,000,246
   Accumulated Depreciation                          (1,383,348)   (1,279,598)
                                                     -----------   -----------
        Net Investments in Real Estate                3,284,391     3,388,141
                                                     -----------   -----------
               Total  Assets                        $ 3,631,046   $ 3,690,804
                                                     ===========   ===========
                                
                                
                        LIABILITIES AND PARTNERS' CAPITAL
                                
CURRENT LIABILITIES:
   Payable to AEI Fund Management, Inc.             $    92,449   $    46,587
   Environmental Claim                                  211,000             0
   Distributions Payable                                 91,189       111,398
   Unearned Rent                                         17,157             0
                                                     -----------   -----------
        Total Current Liabilities                       411,795       157,985
                                                     -----------   -----------
PARTNERS' CAPITAL (DEFICIT):
   General Partners                                     (32,525)      (29,269)
   Limited Partners, $1,000 Unit value;
      7,500 Units authorized and issued;
      6,819 Units outstanding                         3,251,776     3,562,088
                                                     -----------   -----------
        Total Partners' Capital                       3,219,251     3,532,819
                                                     -----------   -----------
          Total Liabilities and Partners' Capital   $ 3,631,046   $ 3,690,804
                                                     ===========   ===========


 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
                             9/30/96    9/30/95      9/30/96     9/30/95

INCOME:
 Rent                      $  142,208  $  138,761  $  425,786   $  417,294
 Investment Income              4,018       3,643     11,389        10,799
                            ----------  ----------  ----------   ----------
        Total Income          146,226     142,404    437,175       428,093
                            ----------  ----------  ----------   ----------

EXPENSES:
 Partnership Administration -
   Affiliates                  25,503      21,972     73,059        72,141
 Partnership Administration 
   and Property Management -
   Unrelated Parties          232,385      13,170    272,342        47,415
 Depreciation                  34,331      35,241    103,750       105,722
                            ----------  ----------  ----------   ----------
        Total Expenses        292,219      70,383    449,151       225,278
                            ----------  ----------  ----------   ----------

NET INCOME (LOSS)          $ (145,993) $   72,021  $ (11,976)   $  202,815
                            ==========  ==========  ==========   ==========

NET INCOME (LOSS) ALLOCATED:
   General Partners        $   (2,920) $      720  $    (240)   $    2,028
   Limited Partners          (143,073)     71,301    (11,736)      200,787
                            ----------  ----------  ----------   ----------
                           $ (145,993) $   72,021  $ (11,976)   $  202,815
                            ==========  ==========  ==========   ==========

NET INCOME (LOSS) PER
 LIMITED PARTNERSHIP UNIT
 (6,819 and 6,844 weighted 
 average Units outstanding in 1996
 and 1995, respectively)   $  (20.77)  $   10.42   $   (1.72)   $   29.34
                            ==========  ==========  ==========   ==========



 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)
                                
                                                        1996         1995

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income (Loss)                                $  (11,976)   $  202,815

   Adjustments to Reconcile Net Income
   To Net Cash Provided by Operating Activities:
     Depreciation                                      103,750       105,722
     (Increase) Decrease in Receivables                     49        (2,600)
     Increase in Payable to
        AEI Fund Management, Inc.                       45,862        32,742
     Increase in Environmental Claim                   211,000             0
     Increase in Unearned Rent                          17,157        12,320
                                                    -----------   -----------
        Total Adjustments                              377,818       148,184
                                                    -----------   -----------
        Net Cash Provided By
        Operating Activities                           365,842       350,999
                                                    -----------   -----------
 
CASH FLOWS FROM FINANCING ACTIVITIES:
   Decrease in Distributions Payable                   (20,209)      (30,792)
   Distributions to Partners                          (301,592)     (292,218)
                                                    -----------   -----------
        Net Cash Used For
        Financing Activities                          (321,801)     (323,010)
                                                    -----------   -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS               44,041        27,989

CASH AND CASH EQUIVALENTS, beginning of period         302,614       268,922
                                                    -----------   -----------

CASH AND CASH EQUIVALENTS, end of period           $   346,655   $   296,911
                                                    ===========   ===========



 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, 1994   $  (26,763)  $ 3,810,223  $ 3,783,460    6,844.30

  Distributions                  (2,922)     (289,296)    (292,218)

  Net Income                      2,028       200,787      202,815
                              ----------   -----------  -----------  ----------
BALANCE, September 30, 1995  $  (27,657)  $ 3,721,714  $ 3,694,057    6,844.30
                              ==========   ===========  ===========  ==========


BALANCE, December 31, 1995   $  (29,269)  $ 3,562,088  $ 3,532,819    6,819.00

  Distributions                  (3,016)     (298,576)    (301,592)

  Net Loss                         (240)      (11,736)     (11,976)
                              ----------   -----------  -----------  ----------
BALANCE, September 30, 1996  $  (32,525)  $ 3,251,776  $ 3,219,251    6,819.00
                              ==========   ===========  ===========  ==========



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

</PAGE>
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                       SEPTEMBER 30, 1996
                                
                           (Unaudited)
                                

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

     AEI  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 of the Partnership.  Robert P. Johnson,  the
     President  and  sole  shareholder  of  NLM,  serves  as  the
     Individual General Partner of the Partnership.  An affiliate
     of   NLM,   AEI   Fund   Management,  Inc.,   performs   the
     administrative and operating functions for the Partnership.
     
     The   terms   of  the  Partnership  offering  call   for   a
     subscription  price of $1,000 per Limited Partnership  Unit,
     payable   on  acceptance  of  the  offer.   The  Partnership
     commenced  operations  on September 17,  1985  when  minimum
     subscriptions    of   1,300   Limited   Partnership    Units
     ($1,300,000)  were  accepted.   The  Partnership's  offering
     terminated on February 4, 1986 when the maximum subscription
     limit  of  7,500 Limited Partnership Units ($7,500,000)  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 the  operation
     of the Partnership, any Net Cash Flow, as defined, which the
     General Partners determine to distribute will be distributed
     90% to the Limited Partners and 10% to the General Partners;
     provided,  however, that such distributions to  the  General
     Partners will be subordinated to the Limited Partners  first
     receiving an annual, noncumulative distribution of Net  Cash
     Flow equal to 10% of their Adjusted Capital Contribution, as
     defined,  and, provided further, that in no event  will  the
     General Partners receive less than 1% of such Net Cash  Flow
     per  annum.  Distributions to Limited Partners will be  made
     pro rata by Units.
     
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)
                                
(2)  Organization - (Continuted)

     Any  Net  Proceeds  of Sale, as defined, from  the  sale  or
     financing of the Partnership's properties which the  General
     Partners determine to distribute will, after provisions  for
     debts  and  reserves, be paid in the following  manner:  (i)
     first,  99%  to the Limited Partners and 1% to  the  General
     Partners until the Limited Partners receive an amount  equal
     to:  (a)  their Adjusted Capital Contribution  plus  (b)  an
     amount  equal  to 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  the  Partnership's
     property,  will  be  allocated first in the  same  ratio  in
     which,  and  to the extent, Net Cash Flow is distributed  to
     the Partners for such year.  Any additional profits will  be
     allocated 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  Partnership
     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 the Partnership's property will  be
     allocated  in  accordance with the Partnership Agreement  as
     follows:  (i) first, to those Partners with deficit balances
     in  their capital accounts in an amount equal to the sum  of
     such  deficit  balances; (ii) second,  99%  to  the  Limited
     Partners  and 1% to the General Partners until the aggregate
     balance in the Limited Partners' capital accounts equals the
     sum  of the Limited Partners' Adjusted Capital Contributions
     plus  an  amount  equal  to 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
                           (Continued)
                                
(3)  Investments in Real Estate -

     In  1995,  the  Partnership elected early  adoption  of  the
     Statement  of  Financial  Accounting  Standards   No.   121,
     "Accounting for Impairment of Long-Lived Assets and for Long-
     Lived Assets to be Disposed Of."  This standard requires the
     Partnership to compare the carrying amount of its properties
     to  the estimated future cash flows expected to result  from
     the  property and its eventual disposition.  If the  sum  of
     the  expected  future cash flows is less than  the  carrying
     amount   of   the  property,  the  Statement  requires   the
     Partnership to recognize an impairment loss by the amount by
     which  the carrying amount of the property exceeds the  fair
     value of the property.
     
     In  1995, the Partnership recognized an impairment  loss  of
     $116,252  on  the  Fair  Muffler property  located  in  Park
     Forest, Illinois.  The loss was the difference between  book
     value  at  December 31, 1995 of $241,252 and an  independent
     appraisal which valued the property at $125,000.  The charge
     was recorded against the carry amount of the land.  The cost
     of  the  building and equipment continue to  be  depreciated
     over the estimated useful life.
     
     The   Fair  Muffler  is  a  one-story  brick  building  with
     approximately  2,450 square feet on an approximately  19,388
     square foot parcel of land.  It was acquired in August, 1986
     and  leased  under a long-term triple net Lease  for  twenty
     years.   In  1989, the lessee filed for bankruptcy  and  the
     Partnership  re-leased  the  property  to  a  Fair   Muffler
     franchisee  who  had  been  operating  the  property  as   a
     sublessee.   The  franchisee has continued  to  operate  the
     property since 1989, but has had financial problems  and  is
     not  in  compliance  with  all of the  terms  of  the  Lease
     Agreement.   The  Partnership  is  reviewing  its  available
     options  which  include selling or re-leasing the  property.
     However,  other real estate in the immediate area  has  been
     taken  back  by  lenders and is maintaining a  high  vacancy
     rate.    In  addition,  in  August,  1996,  the  Partnership
     received  the results of 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 when the  property
     was operated as a gasoline station, which occurred prior  to
     the Partnership's ownership.
     
     An  estimate, prepared by an environmental engineering firm,
     of   approximately  $211,000  has  been  received  for  site
     reclamation  work.  The estimate includes contaminated  soil
     removal,  tank  removal,  soil  sampling,  backfilling   and
     reporting.   The  Partnership has engaged legal  counsel  to
     investigate   what  sources,  if  any,  are  available   for
     indemnification  of these reclamation costs.   At  September
     30, 1996, the Partnership has accrued a current liability of
     $211,000 to reclaim the site.
     
     In  June, 1996, the Partnership entered into an Agreement to
     sell  the Automax in Minneapolis, Minnesota, to the  lessee.
     The lessee was unable to obtain acceptable financing and the
     Agreement was terminated.
     
(4)  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.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

Results of Operations

       For the nine months ended September 30, 1996 and 1995, the
Partnership  recognized rental income of $425,786  and  $417,294,
respectively.   During the same periods, the  Partnership  earned
investment income of $11,389 and $10,799, respectively.

        During the nine months ended September 30, 1996 and 1995,
the  Partnership  paid  Partnership  administration  expenses  to
affiliated  parties of $73,059 and $72,141, 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  $272,342 and $47,415, 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.  An accrual  of
$211,000  was  made  in the third quarter of 1996  for  estimated
environmental  reclamation costs.  Details of  this  expense  are
discussed below.

        In 1995, the Partnership recognized an impairment loss of
$116,252  on  the Fair Muffler property located in  Park  Forest,
Illinois.   The  loss was the difference between  book  value  at
December 31, 1995 of $241,252 and an independent appraisal  which
valued the property at $125,000.  The charge was recorded against
the  carry  amount  of the land.  The cost of  the  building  and
equipment  continue to be depreciated over the  estimated  useful
life.

        The  Fair  Muffler  is a one-story  brick  building  with
approximately 2,450 square feet on an approximately 19,388 square
foot  parcel of land.  It was acquired in August, 1986 and leased
under  a  long-term triple net Lease for twenty years.  In  1989,
the lessee filed for bankruptcy and the Partnership re-leased the
property to a Fair Muffler franchisee who had been operating  the
property as a sublessee.  The franchisee has continued to operate
the  property since 1989, but has had financial problems  and  is
not  in  compliance with all of the terms of the Lease Agreement.
The  Partnership is reviewing its available options which include
selling  or re-leasing the property.  However, other real  estate
in  the  immediate  area has been taken back by  lenders  and  is
maintaining  a high vacancy rate.  In addition, in August,  1996,
the  Partnership  received the results of 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  when  the  property  was
operated  as  a  gasoline station, which occurred  prior  to  the
Partnership's ownership.

        An  estimate,  prepared  by an environmental  engineering
firm,  of  approximately  $211,000 has  been  received  for  site
reclamation  work.   The  estimate  includes  contaminated   soil
removal,  tank removal, soil sampling, backfilling and reporting.
The  Partnership  has engaged legal counsel to  investigate  what
sources,  if  any,  are  available for indemnification  of  these
reclamation  costs.  At September 30, 1996, the  Partnership  has
accrued a current liability of $211,000 to reclaim the site.

        As  of  September 30, 1996, the Partnership's  annualized
cash  distribution rate was 6.27%, based on the Adjusted  Capital
Contribution.   Distributions of Net Cash  Flow  to  the  General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement.  As a result, 99% of distributions and
income  were allocated to Limited Partners and 1% to the  General
Partners.


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

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

Liquidity and Capital Resources

        During  the  nine months ended September  30,  1996,  the
Partnership's cash balances increased $44,041 as the  Partnership
distributed  less  cash to the Partners than  it  generated  from
operating  activities.  Net cash provided by operating activities
increased from $350,999 in 1995 to $365,842 in 1996 mainly  as  a
result  of  net timing differences in the collection of  payments
from the lessees and the payment of expenses by the Partnership.

        In  June, 1996, the Partnership entered into an Agreement
to  sell  the  Automax in Minneapolis, Minnesota, to the  lessee.
The  lessee  was  unable to obtain acceptable financing  and  the
Agreement was terminated.

       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.  However,  in  certain
quarters,   the   Partnership   will   increase   the   quarterly
distribution to pay out contingent rent received as a  result  of
an  increase  in  sales at a property.  The distribution  of  the
contingent  rent  can  cause  the  total  distributions  and  the
distribution payable to fluctuate from year to year.   Redemption
payments are paid to redeeming Partners in the fourth quarter  of
each year.

        In December, 1995, the Partnership distributed $18,578 of
sale  proceeds  to the Limited and General Partners  as  part  of
their  regular quarterly distribution, which represented a return
of capital of $2.70 per Limited Partnership Unit.

        The  Partnership may purchase Units from Limited Partners
who have tendered their Units to the Partnership.  Such Units may
be  acquired at a discount.  The Partnership is not obligated  to
purchase  in any year more than 5% of the total 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.

       On October 1, 1996, four Limited Partners redeemed a total
of  75  Partnership  Units for $41,884  in  accordance  with  the
Partnership  Agreement.   The Partnership  acquired  these  Units
using Net Cash Flow from operations.  In prior years, a total  of
sixty-eight Limited Partners redeemed 680.8 Partnership Units for
$548,742.    The  redemptions  increase  the  remaining   Limited
Partners' ownership interest in the Partnership.

       The continuing rent payments from the properties, together
with  the Partnership's cash reserve, should be adequate to  fund
continuing  distributions and meet other Partnership obligations,
including  those  obligations  associated  with  reclamation   of
contaminated  soil at the Fair Muffler property located  in  Park
Forest, Illinois, on both a short-term and long-term basis.
                                
                                
                   PART II - OTHER INFORMATION
                                
ITEM 1. LEGAL PROCEEDINGS

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

ITEM 2. CHANGES IN SECURITIES

        None.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None.

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

        None.

ITEM 5. OTHER INFORMATION

        None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        a. Exhibits -
                           Description

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

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