----

| Delaware                                                 |   | 75-2220418                         |
|----------------------------------------------------------|--------|------------------------------------|
| (State                or other jurisdiction              |   | (I.R.S.                Employer    |
| of                incorporation or organization)         |   | Identification                No.) |
|                                                     |   |                               |
| 6                Desta Drive, Suite 6500, Midland, Texas |   | 79705                              |
| (Address                of principal executive office)   |   | (Zip                Code)          |

| Indicate                by check mark whether registrant (1) has 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:YesxNo¨ |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Indicate                by check mark whether the registrant is a large accelerated filer,                an                accelerated filer, or a non-accelerated filer.  See definition                of “accelerated filer and large accelerated filer” in Rule 12b-2 of the                Exchange Act. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Large                accelerated filer ¨                                                                                                                                                                                                                                                                                        |   | Accelerated                filer ¨ |   | Non-accelerated                filer  x |   |

| Indicate                by check mark whether the registrant is a shell company (as defined                in                Rule 12b-2 of the Exchange Act). |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ¨                Yes                                                                                                                                     | x                No |

----

|                    | **Table                of Contents**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|-------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | **Page** |
|                    | Glossary                                                                                                                                                                                                            | 3        |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|                    | **Part                I - FINANCIAL INFORMATION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |     |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
| Item                1.  | Financial                Statements                                                                                                                                                                                 | 5        |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|                    | Balance                Sheets as of September 30, 2007 and December 31,                2006                                                                                                                         | 6        |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|                    | Statements                of Operations for the three months and nine months                ended September 30, 2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 7        |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|                    | Statements                of Cash flows for the nine months ended September                30, 2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 8        |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
| Item                2.  | Management’s                Discussion and Analysis of Financial Condition                and Results of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 11       |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
| Item                3.  | Quantitative                and Qualitative Disclosures About Market                Risk                                                                                                                            | 16       |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
| Item                4.  | Controls                and                Procedures                                                                                                                                                               | 16       |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|                    | **Part                II – OTHER INFORMATION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
| Item                1.  | Legal                Proceedings                                                                                                                                                                                    | 17       |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
| Item                1A. | Risk                Factors                                                                                                                                                                                         | 17       |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
| Item                2.  | Unregistered                Sales of Equity Securities and Use of                Proceeds                                                                                                                           | 17       |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
| Item                3.  | Defaults                Upon Senior                Securities                                                                                                                                                       | 17       |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
| Item                4.  | Submission                of Matter to a Vote of Security                Holders                                                                                                                                    | 17       |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
| Item                5.  | Other                Information                                                                                                                                                                                    | 17       |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
| Item                6.  | Exhibits                                                                                                                                                                                                            | 17       |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|                    | Signatures                                                                                                                                                                                                          | 18       |

----

**Glossary      of Oil and Gas Terms**

*Bbl.      *

*BOE.  *

*Developmental      well. *

*Exploratory      well. *

*Farm-out      arrangement. *

*Field.      *

*Mcf.      *

*Net      Profits Interest.  *

*Oil.      *

*Overriding      royalty interest*

----

*Production      costs. *

*Proved      Area*

*Proved      developed oil and gas reserves. *

*Proved      properties*

*Proved      oil and gas reserves. *

*Proved      undeveloped reserves. *

*Reservoir.      *

*Royalty      interest. *

*Standardized      measure of discounted future net cash flows. *
* *

*Working      interest. *

*Workover.      *

----

**PART      I. - FINANCIAL INFORMATION**

**Item      1.                      Financial Statements**

----

**SouthwestRoyalties      Institutional Income Fund VIII-B,      L.P.**

**Balance      Sheets**

|                                                                   |   | **September                30,** |      |   | **December                31,** |   |
|------------------------------------------------------------------------|--------|----------------------------------|-----------|--------|---------------------------------|--------|
|                                                                   |   | **2007**                         |      |   | **2006**                        |   |
|                                                                   |   | **(unaudited)**                  |      |   |                            |   |
| **Assets**                                                             |   |                             |      |   |                            |   |
|                                                                   |   |                             |      |   |                            |   |
| Current                assets:                                         |   |                             |      |   |                            |   |
| Cash                and cash                equivalents                |   | $                                | 88,624    |   |                            | $      | 88,009 |   |
| Receivable                from Managing General                Partner |   |                             | 330,365   |   |                            |   | 181,507 |   |
| New                Mexico income tax                deposits           |   |                             | 1,540     |   |                            |   | 1,168 |   |
| Total                current                assets                     |   |                             | 420,529   |   |                            |   | 270,684 |   |
|                                                                   |   |                             |      |   |                            |   |   |   |
| Oil                and gas properties - using the full-                |   |                             |      |   |                            |   |   |   |
| cost                method of                accounting                |   |                             | 4,198,748 |   |                            |   | 4,198,748 |   |
| Less                accumulated                depreciation,           |   |                             |      |   |                            |   |   |   |
| depletion                and                amortization               |   |                             | 3,781,110 |   |                            |   | 3,767,334 |   |
| Net                oil and gas                properties               |   |                             | 417,638   |   |                            |   | 431,414 |   |
|                                                                   |   |                             |      |   |                            |   |   |   |
|                                                                   |   | $                                | 838,167   |   |                            | $      | 702,098 |   |
|                                                                   |   |                             |      |   |                            |   |   |   |
| **Liabilities                and Partners' Equity**                    |   |                             |      |   |                            |   |   |   |
|                                                                   |   |                             |      |   |                            |   |   |   |
| Asset                retirement obligations                            |   | $                                | 344,847   |   |                            | $      | 322,606 |   |
|                                                                   |   |                             |      |   |                            |   |   |   |
| Partners'                equity:                                       |   |                             |      |   |                            |   |   |   |
| General                partner                                         |   |                             | 15,736    |   |                            |   | 3,031 |   |
| Limited                partners                                        |   |                             | 477,584   |   |                            |   | 376,461 |   |
| Total                partners'                equity                   |   |                             | 493,320   |   |                            |   | 379,492 |   |
|                                                                   |   |                             |      |   |                            |   |   |   |
|                                                                   |   | $                                | 838,167   |   |                            | $      | 702,098 |   |

----

**Southwest      Royalties Institutional Income Fund VIII-B,      L.P.**

**Statements      of Operations**

**(unaudited)**

|                                                    |   | **Three                Months Ended** |    |   | **Nine                Months Ended** |   |
|---------------------------------------------------------|--------|---------------------------------------|---------|--------|--------------------------------------|--------|
|                                                    |   | **September                30,**      |    |   | **September                30,**     |   |
|                                                    |   | **2007**                              |    |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
| **Revenues**                                            |   |                                  |    |   |                                 |   |   |   |   |   |   |   |
|                                                    |   |                                  |    |   |                                 |   |   |   |   |   |   |   |
| Income                from net profits interests        |   | $                                     | 460,338 |   |                                 | $      | 444,054 |   |   | $ | 1,190,842 |   |   | $ | 1,381,136 |   |
| Interest                                                |   |                                  | 1,291   |   |                                 |   | 1,666 |   |   |   | 3,420 |   |   |   | 4,997 |   |
|                                                    |   |                                  | 461,629 |   |                                 |   | 445,720 |   |   |   | 1,194,262 |   |   |   | 1,386,133 |   |
|                                                    |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Expenses**                                            |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation,                depletion and amortization |   |                                  | 4,633   |   |                                 |   | 3,158 |   |   |   | 13,776 |   |   |   | 9,624 |   |
| Accretion                expense                        |   |                                  | 7,585   |   |                                 |   | 4,419 |   |   |   | 22,241 |   |   |   | 12,949 |   |
| General                and administrative               |   |                                  | 25,600  |   |                                 |   | 22,954 |   |   |   | 68,817 |   |   |   | 74,473 |   |
|                                                    |   |                                  | 37,818  |   |                                 |   | 30,531 |   |   |   | 104,834 |   |   |   | 97,046 |   |
|                                                    |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                               |   | $                                     | 423,811 |   |                                 | $      | 415,189 |   |   | $ | 1,089,428 |   |   | $ | 1,289,087 |   |
|                                                    |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net                income allocated to:                 |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Managing                General                Partner  |   | $                                     | 42,844  |   |                                 | $      | 41,835 |   |   | $ | 110,320 |   |   | $ | 129,871 |   |
|                                                    |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Limited                Partners                         |   | $                                     | 380,967 |   |                                 | $      | 373,354 |   |   | $ | 979,108 |   |   | $ | 1,159,216 |   |
|                                                    |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Per                limited partner                unit  |   | $                                     | 37.54   |   |                                 | $      | 36.79 |   |   | $ | 96.49 |   |   | $ | 114.24 |   |

----

**Southwest      Royalties Institutional Income Fund VIII-B,      L.P.**

**Statements      of Cash Flows**

**(unaudited)**

|                                                                     |   | **Nine                Months Ended** |      |
|--------------------------------------------------------------------------|--------|--------------------------------------|-----------|
|                                                                     |   | **September                30,**     |      |
|                                                                     |   | **2007**                             |      |   | **2006** |   |
| Cash                flows from operating activities:                     |   |                                 |      |   |   |   |
| Cash                received from income from                net         |   |                                 |      |   |   |   |
| profits                interests                                         |   | $                                    | 1,041,612 |   |   | $ | 1,309,902 |   |
| Cash                paid to                suppliers                     |   |                                 | (68,817   | ) |   |   | (74,473 | ) |
| Interest                received                                         |   |                                 | 3,420     |   |   |   | 4,997 |   |
| Net                cash provided by operating                activities  |   |                                 | 976,215   |   |   |   | 1,240,426 |   |
|                                                                     |   |                                 |      |   |   |   |   |   |
| Cash                flows from financing activities:                     |   |                                 |      |   |   |   |   |   |
| Distributions                to                partners                  |   |                                 | (975,600  | ) |   |   | (1,275,633 | ) |
| Decrease                in distributions                payable          |   |                                 | -         |   |   |   | (683 | ) |
| Net                cash used in financing                activities      |   |                                 | (975,600  | ) |   |   | (1,276,316 | ) |
|                                                                     |   |                                 |      |   |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents      |   |                                 | 615       |   |   |   | (35,890 | ) |
|                                                                     |   |                                 |      |   |   |   |   |   |
| Beginning                of period                                       |   |                                 | 88,009    |   |   |   | 173,094 |   |
|                                                                     |   |                                 |      |   |   |   |   |   |
| End                of period                                             |   | $                                    | 88,624    |   |   | $ | 137,204 |   |
|                                                                     |   |                                 |      |   |   |   |   |   |
| Reconciliation                of net income to net cash                  |   |                                 |      |   |   |   |   |   |
| provided                by operating activities:                         |   |                                 |      |   |   |   |   |   |
|                                                                     |   |                                 |      |   |   |   |   |   |
| Net                income                                                |   | $                                    | 1,089,428 |   |   | $ | 1,289,087 |   |
|                                                                     |   |                                 |      |   |   |   |   |   |
| Adjustments                to reconcile net income to net                |   |                                 |      |   |   |   |   |   |
| cash                provided by operating activities:                    |   |                                 |      |   |   |   |   |   |
|                                                                     |   |                                 |      |   |   |   |   |   |
| Depreciation,                depletion and                amortization   |   |                                 | 13,776    |   |   |   | 9,624 |   |
| Accretion                expense                                         |   |                                 | 22,241    |   |   |   | 12,949 |   |
| Settlement                of asset retirement                obligations |   |                                 |      |   |   |   |   |   |
| for                plugged and abandoned                wells            |   |                                 | -         |   |   |   | (4,126 | ) |
| Increase                in                receivables                    |   |                                 | (149,230  | ) |   |   | (67,108 | ) |
|                                                                     |   |                                 |      |   |   |   |   |   |
| Net                cash provided by operating activities                 |   | $                                    | 976,215   |   |   | $ | 1,240,426 |   |

----

**Southwest      Royalties Institutional Income Fund VIII-B, L.P.**

**(a      Delaware limited partnership)**

**Notes      to Financial Statements**

**1.                 Organization**

|                                                        | Limited  |   | General  |
|-------------------------------------------------------------|----------|--------|----------|
|                                                        | Partners |   | Partners |
| Interest                income on capital contributions     | 100%     |   | -        |
| Oil                and gas sales from net profits interests | 90%      |   | 10%      |
| All                other revenues                           | 90%      |   | 10%      |
| Organization                and offering costs (1)          | 100%     |   | -        |
| Amortization                of organization costs           | 100%     |   | -        |
| Property                acquisition costs                   | 100%     |   | -        |
| Gain/loss                on property dispositions           | 90%      |   | 10%      |
| Operating                and administrative costs (2)       | 90%      |   | 10%      |
| Depreciation,                depletion and amortization     |     |   |     |
|  of                oil and gas properties              | 100%     |   | -        |
| All                other costs                              | 90%      |   | 10%      |

|   | (1) | All                organization costs in excess of 3% of initial capital contributions                will                be paid by the Managing General Partner and will be treated as a                capital                contribution.  The Partnership paid the Managing General Partner                an amount equal to 3% of initial capital contributions for such                organization costs. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Administrative                costs in any year which exceed 2% of capital contributions shall                be paid                by the Managing Partner and will be treated as a capital                contribution. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**2.                 Summary of Significant Accounting Policies**

----

**Southwest      Royalties Institutional Income Fund VIII-B, L.P.**

**(a      Delaware limited partnership)**

**Notes      to Financial Statements**

**3.                 Abandonment Obligations**

|                                                                     |   | 2007   |    |   | 2006   |   |
|--------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Beginning                of year                                         |   | $      | 322,606 |   |   | $      | 204,577 |   |
| Settlement                of obligations for plugged and abandoned wells |   |   | -       |   |   |   | (4,126 | ) |
| Accretion                expense                                         |   |   | 22,241  |   |   |   | 12,949 |   |
| End                of period                                             |   | $      | 344,847 |   |   | $      | 213,400 |   |

----

| **Item                2.** | **Management's                Discussion and Analysis of Financial Condition                and Results of                Operations** |
|----------------------------|----------------------------------------------------------------------------------------------------------------------------------------|

*General*

*Oil      and Gas Properties*

----

*Critical      Accounting Policies*

----

**Supplemental      Information**

|                                                     |   | **Three                Months Ended** |    |
|----------------------------------------------------------|--------|---------------------------------------|---------|
|                                                     |   | **September                30,**      |    |
|                                                     |   | **2007**                              |    |   | **2006** |   |
| Oil                production in barrels                 |   |                                  | 8,563   |   |   |   | 8,732 |   |
| Gas                production in mcf                     |   |                                  | 7,826   |   |   |   | 8,438 |   |
| Total                (BOE)                               |   |                                  | 9,867   |   |   |   | 10,138 |   |
| Average                price per barrel of oil           |   | $                                     | 71.98   |   |   | $ | 66.07 |   |
| Average                price per mcf of gas              |   | $                                     | 7.31    |   |   | $ | 8.03 |   |
| Partnership                distributions                 |   | $                                     | 350,000 |   |   | $ | 450,000 |   |
| Limited                partner distributions             |   | $                                     | 315,000 |   |   | $ | 405,000 |   |
| Per                unit distribution to limited partners |   | $                                     | 31.04   |   |   | $ | 39.91 |   |
| Number                of limited partner units           |   |                                  | 10,147  |   |   |   | 10,147 |   |

**Operating      Results**

**Income      from net profits**

**Expenses**

----

**Supplemental      Information**

|                                                     |   | **Nine                Months Ended** |    |
|----------------------------------------------------------|--------|--------------------------------------|---------|
|                                                     |   | **September                30,**     |    |
|                                                     |   | **2007**                             |    |   | **2006** |   |
| Oil                production in barrels                 |   |                                 | 24,625  |   |   |   | 27,155 |   |
| Gas                production in mcf                     |   |                                 | 24,226  |   |   |   | 25,312 |   |
| Total                (BOE)                               |   |                                 | 28,663  |   |   |   | 31,374 |   |
| Average                price per barrel of oil           |   | $                                    | 63.19   |   |   | $ | 63.59 |   |
| Average                price per mcf of gas              |   | $                                    | 7.61    |   |   | $ | 7.52 |   |
| Partnership                distributions                 |   | $                                    | 975,600 |   |   | $ | 1,275,633 |   |
| Limited                partner distributions             |   | $                                    | 877,985 |   |   | $ | 1,147,997 |   |
| Per                unit distribution to limited partners |   | $                                    | 86.53   |   |   | $ | 113.14 |   |
| Number                of limited partner units           |   |                                 | 10,147  |   |   |   | 10,147 |   |

**Operating      Results**

**Income      from net profits**

**Expenses**

**Liquidity      and Capital Resources**

----

**Texas      Margin Taxes**

**Recent      Accounting Pronouncements**

----

**Item      3.                      Quantitative and Qualitative Disclosures About Market      Risk**

**Item      4.                      Controls and Procedures**

**Internal      Control Over Financial Reporting**

----

**PART      II. - OTHER INFORMATION**

**Item      1.                   Legal Proceedings**

**Item      1A.                Risk Factors**

**Item      2.                   Unregistered Sales of Equity Securities and      Use of      Proceeds**

**Item      3.                   Defaults Upon Senior Securities**

**Item      4.                   Submission of Matter to a Vote of Security      Holders**

**Item      5.                   Other Information**

**Item      6.                   Exhibits**

|   | (a) | Exhibits: |
|--------|-----|-----------|

|                 31.1 |     Rule                13a-14(a)/15d-14(a) Certification                                                                                                                                                                                     |
|------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 31.2 |     Rule                13a-14(a)/15d-14(a) Certification                                                                                                                                                                                     |
|                 32.1 |     Certification                of Chief Executive Officer and Chief Financial Officer Pursuant to                18                U.S.C. Section 1350, as adopted Pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002 |

----

**SIGNATURES**

|   | Southwest                Royalties Institutional Income Fund |
|--------|--------------------------------------------------------------|
|   | VIII-B,                L.P., a Delaware limited partnership  |
|   |                                                         |
| By:    | Southwest                Royalties, Inc., Managing           |
|   | General                Partner                               |
|   |                                                         |
|   |                                                         |
| By:    | /s/                L. Paul Latham                            |
|   | L.                Paul Latham                                |
|   | President                and Chief Executive Officer         |
|   |                                                         |
| Date:  | November                13, 2007                             |