SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549

                           FORM 10-QSB

           Quarterly Report Under Section 13 or 15(d)
             of The Securities Exchange Act of 1934

              For the Quarter Ended:  June 30, 2001

                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)

                         (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 June 30, 2001 and December 31, 2000

         Statements for the Periods ended June 30, 2001 and 2000:

           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

               JUNE 30, 2001 AND DECEMBER 31, 2000

                           (Unaudited)

                             ASSETS

                                                  2001           2000

CURRENT ASSETS:
  Cash and Cash Equivalents                   $   404,246    $   404,981
  Receivables                                       4,700          5,076
                                               -----------    -----------
      Total Current Assets                        408,946        410,057
                                               -----------    -----------
INVESTMENTS IN REAL ESTATE:
  Land                                          1,446,391      1,446,391
  Buildings and Equipment                       2,663,897      2,663,897
  Accumulated Depreciation                     (1,595,214)    (1,560,662)
                                               -----------    -----------
      Net Investments in Real Estate            2,515,074      2,549,626
                                               -----------    -----------
          Total Assets                        $ 2,924,020    $ 2,959,683
                                               ===========    ===========


                        LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Payable to AEI Fund Management, Inc.        $    10,279    $     8,445
  Land Remediation Estimate                       211,000        211,000
  Distributions Payable                            70,155         69,731
                                               -----------    -----------
      Total Current Liabilities                   291,434        289,176
                                               -----------    -----------
PARTNERS' CAPITAL (DEFICIT):
  General Partners                                (25,271)       (37,892)
  Limited Partners, $1,000 Unit value;
   7,500 Units authorized and issued;
   6,453 Units outstanding                      2,657,857      2,708,399
                                               -----------    -----------
    Total Partners' Capital                     2,632,586      2,670,507
                                               -----------    -----------
      Total Liabilities and Partners' Capital $ 2,924,020    $ 2,959,683
                                               ===========    ===========


 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 JUNE 30

                           (Unaudited)


                               Three Months Ended       Six Months Ended
                              6/30/01      6/30/00    6/30/01      6/30/00

INCOME:
   Rent                     $ 109,477    $ 110,745   $ 219,128    $ 220,058
   Investment Income            3,908        5,908       9,075       11,139
                             ---------    ---------   ---------    ---------
        Total Income          113,385      116,653     228,203      231,197
                             ---------    ---------   ---------    ---------

EXPENSES:
   Partnership Administration -
    Affiliates                 27,027       21,253      51,971       45,793
   Partnership Administration
    and Property Management -
    Unrelated Parties           8,116        2,684      14,596        9,268
   Depreciation                17,276       17,276      34,552       34,552
                             ---------    ---------   ---------    ---------
        Total Expenses         52,419       41,213     101,119       89,613
                             ---------    ---------   ---------    ---------

NET INCOME                  $  60,966    $  75,440   $ 127,084    $ 141,584
                             =========    =========   =========    =========

NET INCOME ALLOCATED:
   General Partners         $  13,610    $     755   $  14,271    $   1,416
   Limited Partners            47,356       74,685     112,813      140,168
                             ---------    ---------   ---------    ---------
                            $  60,966    $  75,440   $ 127,084    $ 141,584
                             =========    =========   =========    =========

NET INCOME PER
  LIMITED PARTNERSHIP UNIT
  (6,453 and 6,600 weighted average
   Units outstanding in 2001 and 2000,
   respectively)            $    7.34    $   11.32   $   17.48    $   21.24
                             =========    =========   =========    =========



 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 JUNE 30

                           (Unaudited)


                                                      2001           2000

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net  Income                                   $   127,084     $   141,584

   Adjustments to Reconcile Net Income to Net Cash
   Provided by Operating Activities:
     Depreciation                                     34,552          34,552
     Decrease in Receivables                             376             434
     Increase (Decrease) in Payable to
        AEI Fund Management, Inc.                      1,834          (6,075)
     Increase in Unearned Rent                             0           5,315
                                                  -----------     -----------
        Total Adjustments                             36,762          34,226
                                                  -----------     -----------
        Net Cash Provided By
        Operating Activities                         163,846         175,810
                                                  -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase in Distributions Payable                     424              38
   Distributions to Partners                        (165,005)       (150,858)
                                                  -----------     -----------
        Net Cash Used For
        Financing Activities                        (164,581)       (150,820)
                                                  -----------     -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS                                    (735)         24,990

CASH AND CASH EQUIVALENTS, beginning of period       404,981         402,868
                                                  -----------     -----------
CASH AND CASH EQUIVALENTS, end of period         $   404,246     $   427,858
                                                  ===========     ===========



 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 JUNE 30

                           (Unaudited)



                                                                    Limited
                                                                  Partnership
                             General      Limited                    Units
                             Partners     Partners     Total      Outstanding


BALANCE, December 31, 1999  $(37,268)   $2,770,116   $2,732,848     6,599.66

  Distributions               (1,509)     (149,349)    (150,858)

  Net Income                   1,416       140,168      141,584
                             --------    ----------   ----------   ----------
BALANCE, June 30, 2000      $(37,361)   $2,760,935   $2,723,574     6,599.66
                             ========    ==========   ==========   ==========


BALANCE, December 31, 2000  $(37,892)   $2,708,399   $2,670,507     6,452.66

  Distributions               (1,650)     (163,355)    (165,005)

  Net Income                  14,271       112,813      127,084
                             --------    ----------   ----------   ----------
BALANCE, June 30, 2001      $(25,271)   $2,657,857   $2,632,586     6,452.66
                             ========    ==========   ==========   ==========


 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

                          JUNE 30, 2001

                           (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 ($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 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

                          JUNE 30, 2001
                           (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, 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

                          JUNE 30, 2001
                           (Continued)

(3)  Investments in Real Estate -

     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.  An estimate
     for site remediation work, which includes soil removal, tank
     removal,  soil  sampling,  backfilling  and  reporting,   of
     $211,000  was  received  from an  environmental  engineering
     firm.  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.   It  is reasonably  possible  that  the
     actual costs could materially differ from the estimate.

     On  August  5,  1998, the Partnership sold the Fair  Muffler
     property  to  the  current  tenant  for  $5,000.   The  sale
     resulted  in  a  net  gain  of  $704.   The  Partnership  is
     reviewing  its  legal obligation for the site liability  and
     may  have  adjustments to the accrued  liability  in  future
     periods.

(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  six  months ended June 30, 2001 and  2000,  the
Partnership  recognized rental income of $219,128  and  $220,058,
respectively.   During the same periods, the  Partnership  earned
investment income of $9,075 and $11,139, respectively.

        During  the six months ended June 30, 2001 and 2000,  the
Partnership   paid   Partnership   administration   expenses   to
affiliated  parties of $51,971 and $45,793, 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  $14,596  and $9,268, 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.

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.  An estimate for site remediation work, which includes
soil  removal,  tank  removal,  soil  sampling,  backfilling  and
reporting,   of  $211,000  was  received  from  an  environmental
engineering   firm.   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.  It is reasonably possible that the actual
costs could materially differ from the estimate.

        On  August 5, 1998, the Partnership sold the Fair Muffler
property to the current tenant for $5,000.  The sale resulted  in
a  net  gain  of  $704.  The Partnership is reviewing  its  legal
obligation for the site liability and may have adjustments to the
accrued liability in future periods.

        As  of  June 30, 2001, the Partnership's annualized  cash
distribution  rate  was  5.0%,  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.

        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  six  months  ended  June  30,  2001,   the
Partnership's  cash  balances decreased $735 as  the  Partnership
distributed  more  cash to the Partners than  it  generated  from
operating  activities.  Net cash provided by operating activities
decreased from $175,810 in 2000 to $163,846 in 2001.

       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.

        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  2000, eight Limited Partners redeemed a total  of
147 Partnership Units for $60,299 accordance with the Partnership
Agreement.  The Partnership acquired these Units using  Net  Cash
Flow  from  operations.  In prior years, a  total  of  ninety-two
Limited  Partners redeemed 900.14 Partnership Units for $656,679.
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  remediation   of
contaminated  soil at the Fair Muffler property located  in  Park
Forest, Illinois, on both a short-term and long-term basis.

Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995

         The   foregoing  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 investors;

    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.


                   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.

                   PART II - OTHER INFORMATION
                           (Continued)

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 - None.

      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:  August 7, 2001        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)