UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549


                            FORM 8-K


                         CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)  October 6, 2004


        AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
     (Exact name of registrant as specified in its charter)


      State of Minnesota             0-29274         41-1789725
(State or other jurisdiction   (Commission File    (IRS Employer
      of incorporation)             Number)       Identification No.)


      30 East 7th Street, Suite 1300, St. Paul, Minnesota, 55101
             (Address of Principal Executive Offices)


                           (651) 227-7333
       (Registrant's telephone number, including area code)


  (Former name or former address, if changed since last report)

Check  the  appropriate  box below if  the  Form  8-K  filing  is
intended to simultaneously satisfy the filing obligation  of  the
registrant under any of the following provisions:

[  ]  Written  communication  pursuant  to  Rule  425  under  the
      Securities Act (17 CFR 230.425)
[  ]  Soliciting  material  pursuant to  Rule  14a-12  under  the
      Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to  Rule  14d-2(b)
      under the Exchange Act
      (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to  Rule  13e-4(c)
      under the Exchange Act
      (17 CFR 240.13e-4(c))

Section 2 - Financial Information

Item 2.01 Completion of Acquisition or Disposition of Assets.

       On October 6, 2004, the Partnership sold a Johnny Carino's
restaurant  in  Farmington, New Mexico  to  Jaroslaw  Paluha  and
Joseph  A.  Barraco,  unrelated third parties.   The  Partnership
received  net cash proceeds of approximately $2,900,000  for  the
property, which resulted in a net gain of approximately $793,000.

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

      (a) Financial statements  of  businesses  acquired  -   Not
          Applicable.

      (b) Pro forma  financial information - A limited number  of
          pro  forma  adjustments are required to illustrate  the
          effects  of  the transaction on the balance  sheet  and
          income  statement.  The following narrative description
          is  furnished  in  lieu  of the pro  forma  statements.
          Assuming  the  Partnership had  sold  the  property  on
          January 1, 2003:

          The  Partnership's  Current Assets  (cash)  would  have
          increased  by  $2,900,000 and its Investments  in  Real
          Estate   would   have  decreased  by  $834,509,   which
          represented   land   and   initial   construction   and
          acquisition costs related to the property.  On  October
          31,  2002,  the  Partnership  purchased  the  land  for
          $810,000.   Simultaneously with  the  purchase  of  the
          land,   the  Partnership  entered  into  a  Development
          Financing   Agreement  under  which   the   Partnership
          advanced funds to the lessee for the construction of  a
          Johnny   Carino's  restaurant  on  the  site.   Through
          December 31, 2002, the Partnership advanced $24,509 for
          construction  of  the  property.   During   2003,   the
          Partnership   incurred  additional   construction   and
          acquisition    costs   totaling   $1,348,835.     Total
          acquisition costs for the property were $2,183,344.

          For  the  year  ended December 31,  2003,  Income  from
          Continuing  Operations would have  decreased  $166,289,
          representing a decrease in rental income of $171,757, a
          decrease in depreciation expense of $41,009, a decrease
          in  property  management  expenses  of  $1,226  and   a
          decrease   in  interest  income  of  $36,767   from   a
          construction loan related to the property.  For the six
          months  ended  June 30, 2004, Income from  Discontinued
          Operations would have decreased $79,503, representing a
          decrease  in  rental income of $115,500, a decrease  in
          depreciation  expense  of $35,152  and  a  decrease  in
          property management expenses of $845.

          The  net  effect  of these pro forma adjustments  would
          have  caused Net Income to decrease from $3,366,980  to
          $3,200,691  and from $708,976 to $629,473, which  would
          have  resulted in Net Income of $137.79 and $27.20  per
          Limited Partnership Unit outstanding for the year ended
          December  31,  2003 and the six months ended  June  30,
          2004, respectively.

      (c) Exhibits.

          Exhibit  10.1 - Purchase Agreement dated June  14,  2004
          between the Partnership and Jaroslaw Paluha and  Joseph
          A.  Barraco relating to the Property at 3500 East  Main
          Street,   Farmington,  New  Mexico   (incorporated   by
          reference  to Exhibit 10.1 of Form 10-QSB filed  August
          10, 2004).


                           SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act
of  1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.

                              AEI INCOME & GROWTH FUND XXI
                              LIMITED PARTNERSHIP

                              By: AEI Fund Management XXI, Inc.
                                 Its:  Managing General Partner


Date:  October 7, 2004        /s/ Patrick W Keene
                              By: Patrick W. Keene
                                 Its:  Chief Financial Officer