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 AND EXCHANGE ACT OF 1934


Date of Report (Date of Earliest Event Reported)  August 29,2003


        AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
   (Exact Name of Registrant as Specified in its Charter)

                     State of Minnesota
      (State or other Jurisdiction of Incorporation or
                        Organization)




           0-16555                      41-1571166
   (Commission File Number)          (I.R.S. Employer
                                   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)



Item 2.   Acquisition or Disposition of Assets.

      On August 29, 2003, the Partnership sold a Fuddruckers
restaurant  in Omaha, Nebraska to an unrelated third  party.
The  Partnership  received  net  proceeds  of  approximately
$1,582,000 for the property, which resulted in a net gain of
approximately $1,045,000.

Item 7.   Financial Statements and Exhibits.

          (a)A  limited  number of proforma 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
             proforma statements:

             Assuming  the Partnership had sold the property
             on   January   1,   2002,   the   Partnership's
             Investments  in  Real Estate  would  have  been
             reduced  by  $568,556 and  its  Current  Assets
             (cash)  would  have increased by  approximately
             $1,582,000  and  Partner's Capital  would  have
             increased by $1,013,444.

             The  rental  income  for the Partnership  would
             have  decreased from $490,486 to  $347,815  for
             the  year  ended  December 31,  2002  and  from
             $207,730  to $129,190 for the six months  ended
             June  30, 2003 if the Partnership had not owned
             the property during the periods.

             Depreciation  Expense would have  decreased  by
             $19,427  and $9,714 for the year ended December
             31,  2002  and  the six months ended  June  30,
             2003, respectively.

             Partnership    Administration   and    Property
             Management  Expense  would  have  decreased  by
             $9,925  and $5,887 for the year ended  December
             31,  2002  and  the six months ended  June  30,
             2003, respectively.

             The  net  effect of these pro forma adjustments
             would   have  caused  Net  Income   (Loss)   to
             increase from $(174,578) to $(287,897)  and  to
             decrease  from  $63,170 to  $231,  which  would
             have  resulted in Net Income (Loss) of $(25.95)
             and   $-0-   per   Limited   Partnership   Unit
             outstanding  for  the year ended  December  31,
             2002  and  the six months ended June 30,  2003,
             respectively.

          (b)Exhibits

                         Exhibit  10.1 - Purchase  Agreement
                         dated  May  22,  2003  between  the
                         Partnership  and Steven  R.  Schell
                         relating  to the property  at  7059
                         Dodge   Street,   Omaha,   Nebraska
                         (incorporated   by   reference   to
                         Exhibit  10.3 of Form 10-QSB  filed
                         on August 8, 2003).


                         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 REAL ESTATE FUND XVI
                              LIMITED PARTNERSHIP

                               By:  AEI Fund Management XVI,
Inc.
                                 Its:  General Partner


Date:  September 4, 2003      /s/ Patrick W Keene
                              By: Patrick W. Keene
                              Its Chief Financial Officer