SCHEDULE 14A
                                   (RULE 14a-101)
                       INFORMATION REQUIRED IN PROXY STATEMENT
                              SCHEDULE 14A INFORMATION

                  PROXY STATEMENT PURUANT TO SECTION 14(a) OF THE
                  SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )



Filed by the registrant [X]

Filed by a party other than the registrant [ ]

Check the appropriate box:

[ ]  Preliminary proxy statement
[X]  Definitive proxy statement
[ ]  Definitive additional materials
[ ]  Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ]  Confidential, for Use of the Commission Only(as permitted by Rule
     14a-6(e)(2))


                                   OSMONICS, INC.
                  ------------------------------------------------ 
                  (Name of Registrant as Specified in Its Charter)


       ----------------------------------------------------------------------- 
       (Name of Person(s) Filing Proxy Statement, if other than the Registrant



Payment of filing fee (Check the appropriate box):

[X]  No fee required
[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11

     (1)  Title of each class of securities to which transaction applies:

     (2)  Aggregate number of securities to which transaction applies:

     (3)  Per unit price or other underlying value of transaction computed
          pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
          the filing fee is calculated and state how it was determined):

     (4)  Proposed maximum aggregate value of transaction:

     (5)  Total fee paid:

[ ]  Fee paid previously with preliminary materials
[ ]  Check box if any part of the fee is offset as provided by Exchange Act
     Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
     paid previously.  Identify the previous filing by registration statement
     number, or the form or schedule and the date of its filing.

     (1)  Amount previously paid:

     (2)  Form, schedule or registration statement no.:

     (3)  Filing party:

     (4)  Date filed:





                      NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                                    MAY 12, 1999




          To The Shareholders of Osmonics, Inc.:


             NOTICE IS HEREBY GIVEN that the Annual Meeting of
          Shareholders of Osmonics, Inc. ("the Company") will be held at
          the Minneapolis Club, 729 Second Avenue South, Minneapolis,
          Minnesota 55402 on May 12, 1999 at 3:30 p.m., and at any
          adjournments thereof, to consider and act upon the following
          matters:

           1.  To elect two directors to serve a term of three years.

           2.  To transact such other business as may properly come before
               the meeting or any adjournments thereof.

             The Board of Directors has fixed the close of business on
          March 22, 1999 as the record date for the determination of
          shareholders entitled to notice of, and to vote at, the meeting
          or any adjournments thereof.  The accompanying Proxy Statement
          forms a part of this Notice. 

             You are cordially invited to attend the meeting.  Even if you
          plan to attend the meeting, we urge you to sign, date and return
          the proxy, which is solicited by the Board of Directors, at once
          in the enclosed envelope.




                                        By Order of the Board of Directors

                                        Ruth Carol Spatz, Secretary



          April 15, 1999



                                 PROXY STATEMENT FOR
                           ANNUAL MEETING OF SHAREHOLDERS
                                    MAY 12, 1999

                                   GENERAL MATTERS

               This Proxy Statement is furnished to shareholders in
            conjunction with the solicitation by the Board of Directors
            of Osmonics, Inc. of proxies for use at the Annual Meeting of
            Shareholders to be held on May 12, 1999.

               The record date for the determination of shareholders
            entitled to notice of and to vote at the meeting is the close
            of business on March 22, 1999.  On that date there were
            14,012,784 Common shares outstanding.  Each share is entitled
            to one vote. 

               If a proxy in the accompanying form is duly executed and
            returned, the shares represented thereby will be voted. 
            Where a specification is made on the proxy, the shares will
            be voted in accordance with such specification.  When no
            specification is made on the proxy, the proxy will be voted
            for the election as directors of the nominees named herein. 
            A proxy may be revoked by the shareholder at any time prior
            to its being voted by giving written notice of revocation to
            the Secretary of the Company, in open meeting, or by casting
            a written ballot at the meeting.  Attendance at the meeting
            by a shareholder will not by itself be considered revocation
            of the shareholder's proxy. 

               The cost of soliciting proxies will be borne by the
            Company.  In addition to solicitation by mail, officers and
            regular employees may solicit proxies by telephone, telegraph
            or in person.  On request, the Company will reimburse banks,
            brokerage firms and other custodians, nominees and
            fiduciaries for reasonable expenses incurred by them in
            sending soliciting material to the owners of the shares.

               This Proxy Statement and the accompanying materials are
            first being sent to shareholders on or about April 15, 1999.


                              ELECTION OF DIRECTORS

               The present Board of Directors of Osmonics is composed of
            seven members.  Directors are elected for a term of three
            years with positions staggered so that approximately
            one-third of the directors are elected at each annual meeting
            of shareholders.  It is intended that the proxies received
            will be voted, unless authority is withheld, FOR the election
            of the nominees listed below, namely Ralph E. Crump and
            Charles W. Palmer to serve until the 2002 Meeting of
            Shareholders. The affirmative vote of the holders of the
            greater of (a) a majority of the outstanding shares of Common
            Stock of the Company present and entitled to vote on the
            election of directors or (b) a majority of the voting power
            of the minimum number of shares entitled to vote that would
            constitute a quorum for transaction of business at the
            meeting, is required for election to the Board of each of the
            two nominees named below.  A shareholder who abstains with
            respect to the election of directors is considered to be
            present and entitled to vote on the election of directors at
            the meeting, and is in effect casting a negative vote, but a
            shareholder (including a broker) who does not give authority
            to a Proxy to vote, or withholds authority to vote, on the
            election of directors shall not be considered present and
            entitled to vote on the election of directors.  The nominees
            are currently serving as directors and have consented, if
            elected, to serve for a new term.

               The following sets forth information with respect to each
            nominee for election as director and each other person whose
            term of office as a director will continue after the meeting.


            NOMINEES FOR ELECTION FOR A TERM OF THREE YEARS:

               RALPH E. CRUMP, age 75, was an initial investor in
            Osmonics in 1969.  He founded Frigitronics, Inc., a
            manufacturer of ophthalmic and medical instruments, in 1963
            and was its President and Chairman of the Board until
            December 1986.  He is a graduate of the United States
            Merchant Marine Academy and has a degree in Engineering from
            UCLA.  Mr. Crump is also a director of SI Technologies, Inc.,
            Mity-Lite, Inc., Imtec, Inc., and Stratasys, Inc., all of
            which are traded on NASDAQ.

               CHARLES W. PALMER, age 62, is currently a private
            investor.  He had been the Chairman and Chief Executive
            Officer of Autotrol Corporation from 1989 through
            October 1993, when Autotrol was merged into the Company.  He
            was the Chairman and Chief Executive Officer of The Palmer
            Group Ltd., a Midwestern real estate development firm from
            1980 through 1996.  Mr. Palmer is a graduate of Yale
            University with an A.B. in American studies and earned an
            M.B.A. at Northwestern University. 


            DIRECTORS WHOSE TERMS EXPIRE IN 2000:

               VERITY C. SMITH, age 76, Director, Vaponics Ltd. (UK),
            President, Veritec Consultants, was a founder of Vaponics,
            Inc. and held the position of Chief Executive Officer from
            its inception in 1967 until it was acquired by Osmonics in
            July 1987.  He was elected a director of Osmonics in August
            1987.  He has a B.S. in Chemical Engineering from
            Massachusetts Institute of Technology and is a fellow of the
            American Institute of Chemical Engineers.

               D. DEAN SPATZ, age 55, President and Chairman of the
            Board of Directors of Osmonics, has held his current position
            since founding Osmonics in 1969.  He has a B.A. from
            Dartmouth College and a Master of Engineering degree from the
            Thayer School of Engineering, Dartmouth College.  Mr. Spatz
            is also a director of SI Technologies, Inc. and
            Sigma Aldrich Corp., both of which are traded on NASDAQ.
            Mr. Spatz and Ruth Carol Spatz are husband and wife. 


            DIRECTORS WHOSE TERMS EXPIRE IN 2001:

               WILLIAM EYKAMP, age 62, was appointed to the Board of
            Directors in October 1997.  He is currently a management
            consultant and an adjunct professor of Chemical Engineering
            at Tufts University.  He served as president and director of
            Koch Membrane Systems Inc., formerly Abcor Inc., from 1981 to
            1988.  Mr. Eykamp holds a Ph.D. in Chemical Engineering from
            Massachusetts Institute of Technology and a Bachelor of
            Science degree from Purdue University.

               MICHAEL L. SNOW, age 48, of Counsel in the law firm of
            Maslon Edelman Borman & Brand, a Limited Liability
            Partnership, has been a director of Osmonics since 1989. 
            Maslon Edelman Borman & Brand, a Limited Liability
            Partnership, has rendered legal services to Osmonics during
            the last fiscal year.  Mr. Snow received a Bachelor of Arts
            degree and Juris Doctor from the University of Michigan. 

               RUTH CAROL SPATZ, age 54, Secretary and Director of
            Osmonics, was a founder of Osmonics in 1969 and has held her
            current position since its inception.  She is a graduate of
            the University of Vermont with a degree in Chemistry. 


            BOARD OF DIRECTORS AND COMMITTEES

               The Board of Directors of Osmonics held five meetings
            during 1998.  Osmonics has an Audit Committee, a Compensation
            Committee, and a Stock Option Committee, but does not have a
            Nominating Committee. 

               Osmonics' Audit Committee, which consists of Messrs.
            Ralph E. Crump and Michael L. Snow, met once during 1998. 
            The Audit Committee recommends to the full Board the
            engagement of the independent accountants, reviews the audit
            plan and results of the audit engagement, reviews the
            independence of the auditors, and reviews the adequacy of
            Osmonics' system of internal accounting controls.

               Osmonics' Compensation Committee, which consists of
            Messrs. Ralph E. Crump and Michael L. Snow, met once during
            1998.  The Compensation Committee reviews and recommends to
            the full Board executive compensation.

               Osmonics' Stock Option Committee, which consists of
            Messrs. Ralph E. Crump, D. Dean Spatz and Mrs. Ruth Carol
            Spatz, met two times during 1998.  The Stock Option Committee
            proposes and recommends to the full Board stock option grants
            to executives and other key personnel under the existing
            Osmonics 1993 Stock Option and Compensation Plan.

 
            COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND
            MANAGEMENT

               The following table provides information as to the
            beneficial ownership of the Company's Common Stock, as of
            March 22, 1999, by (i) each person known by the Company to be
            the beneficial owner of more than 5% of such Common Stock,
            (ii) each nominee and continuing director of the Company,
            (iii) the Company's Chief Executive Officer and four other
            most highly compensated executive officers for fiscal year
            1998 and (iv) the directors and executive officers as a group
            (16 persons).  Beneficial ownership has been determined for
            this purpose in accordance with Rule 13d-3 of the Securities
            and Exchange Commission under which a person is deemed to be
            the beneficial owner of securities if he or she has or shares
            voting power or dispositive power with respect to such
            securities or has the right to acquire beneficial ownership
            of such securities within 60 days by exercise of an option or
            otherwise.  The persons named in the table have sole voting
            and dispositive powers with respect to all shares of Common
            Stock unless otherwise noted in the notes following the
            table. 

            Name of Beneficial
            Owner Including        Amount and Nature of
            Address of Owners      Beneficial Ownership      Percent of
            for More than 5%         of Common Stock        Common Stock
            ------------------     --------------------     ------------

            State Farm Mutual
             Automobile
             Insurance Company
             One State Farm Place
             Bloomington, IL 61701      1,388,812 (1)            9.8

            Heartland Advisors Inc.
             790 North Milwaukee
             Street                     1,346,600 (2)            9.5
             Milwaukee, WI 53202

            Ralph E. Crump                612,900 (3)            4.3
            William Eykamp                 14,501 (4)             *
            Bjarne N. Nicolaisen           61,631 (5)             *
            Charles W. Palmer(7)        1,336,780 (6)            9.4
            Andrew T. Rensink              10,000 (8)             *
            L. Lee Runzheimer              47,188 (9)             *
            Verity C. Smith                17,196 (11)            *
            Michael L. Snow               181,900 (12)           1.3
            D. Dean Spatz(7)            1,085,494 (13)           7.6
            Ruth Carol Spatz(7)         1,062,794 (13)           7.5
            Kenton C. Toomey               10,000 (10)            *

            All directors and           4,032,929 (14)          28.4
            executive officers as
            a group (16 persons) 


              *  Less than 1%

             (1) Beneficial ownership is based upon a Schedule 13G on file
                 dated February 1, 1999.  State Farm Mutual Automobile
                 Insurance Company's affiliated corporations have sole
                 voting and investment power with respect to 421,875
                 shares, 438,750 shares and 528,187 shares, respectively.


             (2) Beneficial ownership is based upon a Schedule 13G filed
                 February 5, 1999.

             (3) Includes 300,450 shares held by his spouse.  Mr. Crump
                 disclaims beneficial ownership of these shares.  Includes
                 12,000 shares not outstanding but issuable upon options
                 exercisable within 60 days of the above date. 

             (4) Includes 6,000 shares not outstanding but issuable upon
                 options exercisable within 60 days of the above date. 

             (5) Includes 59,087 shares not outstanding but issuable upon
                 options exercisable within 60 days of the above date and
                 683 shares held by his spouse.

             (6) Includes 12,000 shares not outstanding but issuable upon
                 options exercisable within 60 days of the above date.

             (7) The address is 5951 Clearwater Drive, Minnetonka,
                 Minnesota 55343.

             (8) Includes 2,500 shares not outstanding but issuable upon
                 options exercisable within 60 days of the above date.

             (9) Includes 2,500 shares not outstanding but issuable upon
                 options exercisable within 60 days of the above date.

            (10) Includes 10,000 shares not outstanding but issuable upon
                 options exercisable within 60 days of the above date.

            (11) Includes 12,000 shares not outstanding but issuable upon
                 options exercisable within 60 days of the above date.

            (12) Includes 57,000 shares not outstanding but issuable upon
                 options exercisable within 60 days of the above date. 
                 Includes 15,000 shares held as custodian for minor
                 children.

            (13) Mr. and Mrs. Spatz possess sole voting and investment
                 power with respect to 583,464 and 560,683, respectively,
                 of such shares and they possess shared voting and
                 investment power with respect to 498,640 of which 265,464
                 are held by The Spatz Limited Partnership.  Includes
                 options to purchase 12,000 shares not outstanding but
                 issuable upon options exercisable within 60 days of the
                 above date for each person.

            (14) Includes 208,087 shares not outstanding but issuable
                 upon options exercisable within 60 days of the above
                 date.  Includes 300,450 shares owned by Marjorie L.
                 Crump, spouse of Ralph E. Crump, a director; and 683
                 owned by Sue Nicolaisen, spouse of Bjarne N. Nicolaisen.


                               EXECUTIVE COMPENSATION

               The following table sets forth the cash and non-cash
            compensation for each of the last three fiscal years awarded
            to or earned by the Chief Executive Officer of the Company
            and each of the four other most highly compensated executive
            officers of the Company whose salary and bonus exceeded
            $100,000 during the 1998 fiscal year. 

                             SUMMARY COMPENSATION TABLE

                                                         Long Term
                                                        Compensation
                                 Annual Compensation       Awards
                                ------------------------------------
                                                         Securities  All Other
            Name and                    Salary           Underlying Compensation
            Principal Position   Year     (1)     Bonus  Options(#)      (2)
            ------------------   ----  --------  ------- ---------- ------------

            D. Dean Spatz        1998  $304,807  $10,000   18,000     $ 6,937
            Chairman             1997   292,767   94,000    3,000       7,893
            Chief Executive      1996   270,140  280,000    3,000      10,269
             Officer

            Kenton C. Toomey     1998  $142,230  $15,000   10,000     $ 1,136
            Vice President       1997    94,064   15,000   20,000       3,775
             Operations          1996         -        -        -           -

            Bjarne N. Nicolaisen 1998  $142,155  $10,000    7,000     $17,824
            Vice President       1997   136,555   20,000        -      12,770
             International       1996   118,485   20,000        -           -

            L. Lee Runzheimer    1998  $140,129  $ 3,000    7,000     $ 3,248
            Chief Financial      1997   129,134    8,000    5,000       7,493
            Officer              1996   129,057   26,000        -      11,674

            Andrew T. Rensink    1998  $120,450  $ 5,000   10,000     $ 2,721
            Vice President       1997   108,283    8,000    5,000       6,403
             Quality and         1996   104,031   30,000        -      10,385
             Regulatory Affairs


            (1) Includes cash compensation deferred at the election of
                the executive under the terms of Osmonics' 401(k) Plan.

            (2) Includes matching funds from Osmonics in the 401(k)
                Savings Plan paid in the form of Osmonics Common Stock,
                valued at the closing price on December 31, 1998, which
                was $8.4375 per share, and contributions by Osmonics to
                the Profit Sharing Retirement Plan of $3,646 for Mr.
                Spatz, $1,136 for Mr. Toomey, $8,484 for Mr. Nicolaisen,
                $3,248 for Mr. Runzheimer and $2,721 for Mr. Rensink for
                1998. 


                          OPTION GRANTS IN LAST FISCAL YEAR

            The following table sets forth information concerning the
            grant of stock options to the Chief Executive Officer and the
            other four highest-paid executive officers in 1998.

                                           Percent
                                           of Total
                              Number of    Options
                              Securities   Granted   Exercise           Grant
                              Underlying     to         or              Date
                               Options    Employees    Base   Expira   Present
                               Granted    in Fiscal    Price   tion     Value
                  Name           (1)         Year       (1)    Date      (2)
            ----------------  ----------  ---------  -------- -------  -------

            D. Dean Spatz       15,000       4.4     $10.125  9/20/08  $70,158
                                 3,000(3)             15.875  5/12/08   22,000

            Kenton C. Toomey    10,000       3.0      10.125  9/20/08   46,772

            Bjarne N. Nicolaisen 7,000       2.1      10.125  9/20/08   32,740

            L. Lee Runzheimer    7,000       2.1      10.125  9/20/08   32,740

            Andrew T. Rensink   10,000       3.0      10.125  9/20/08   46,772


            (1) The indicated options were granted pursuant to the 1993
                Osmonics Stock Option and Compensation Plan.  The options
                were granted at the fair market value of Osmonics on
                September 21, 1998, have 10-year terms and become
                exercisable in equal annual increments over a 4-year
                period beginning on the first anniversary.  Vested
                options must be exercised within 90 days of termination
                of employment.

            (2) The Grant Date Present Value was calculated using the
                Black-Scholes valuation model, assuming a volatility rate
                of 42.5 percent, a risk-free rate of return of
                6.0 percent, a dividend yield of 0 percent, and a
                projected time of exercise of five years.  The actual
                amount, if any, realized upon the exercise of stock
                options will depend upon the market price of Osmonics
                Common Shares relative to the exercise price per share of
                the stock option at the time of exercise.  There is no
                assurance that the hypothetical grant date present values
                of the stock options reflected in this table will
                actually be realized. 

            (3) Granted pursuant to Osmonics 1995 Director Stock Option
                Plan, whereby an option for 3,000 shares is granted to
                each continuing director on the date of the Annual
                Meeting at the Fair Market Price on that date.  The
                option vests fully on the first anniversary of the grant.


            STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END
            OPTION VALUES

               The following table summarizes information with respect
            to options held by the Chief Executive Officer and the
            executive officers named in the Summary Compensation Table,
            and the value of the options held by such persons at the end
            of fiscal year 1998. 


                                               Number of          Value of
                                               Securities       Unexercised
                                               Underlying       In-The-Money
                                               Unexercised       Options at
                                               Options at      Fiscal Year-End
                         Shares              Fiscal Year-End       (2) (3)
                        Acquired   Value     ---------------   ---------------
                           on     Realized   Exer-   Unexer-   Exer-   Unexer-
               Name     Exercise    (1)      cisable cisable   cisable cisable
            ----------  --------  --------   ------- -------   ------- -------

            D. Dean         -         -       9,000   18,000      -       -
            Spatz

            Kenton C.       -         -       5,000   25,000      -       -
            Toomey

            Bjarne N.       -         -      59,087    7,000   $148,547   -
            Nicolaisen

            L. Lee          -         -       1,250   10,750      -       -
            Runzheimer

            Andrew T.       -         -       1,250   13,750      -       -
            Rensink


            (1) Value realized is the aggregate market value, on the date
                of exercise, of the shares acquired less the aggregate
                exercise price paid for such shares.

            (2) Value of unexercised options is the difference between
                the aggregate market value of the underlying shares
                (based on the closing price on December 31, 1998, which
                was $8.4375 per share) and the aggregate exercise price
                for such shares.

            (3) All options granted to the named Officers were at a price
                greater than the closing price on December 31, 1998, with
                the exception of exercisable options granted to
                Mr. Nicolaisen by Desalination Systems, Inc. prior to its
                merger with Osmonics in 1996.  These options were
                converted to options to purchase Osmonics shares.


            COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

               Osmonics' Compensation Committee consists of Messrs.
            Ralph E. Crump and Michael L. Snow.  Mr. Snow is of Counsel
            in the law firm of Maslon Edelman Borman & Brand, a Limited
            Liability Partnership, which rendered legal services to
            Osmonics during the last fiscal year.


            DIRECTOR COMPENSATION

               Since 1995, the Company has maintained a Director Stock
            Option Plan (the "Director Plan").  A total of 250,000 shares
            of Common Stock are reserved for issuance under the Director
            Plan.  Each director of the Company is eligible to
            participate in the Director Plan, including directors who are
            employees of the Company.  Under the Director Plan, each
            director automatically is granted an option to purchase 3,000
            shares at the time of each annual meeting of the Company's
            shareholders.  All options granted under the Director Plan
            have an exercise price equal to the fair market value of the
            Company's Common Stock on the date of grant and become
            exercisable one year after the date of grant.  The Company
            will receive no consideration upon the grant of options under
            the 1995 Director Plan.  The exercise price of an option must
            be paid in full upon exercise.  Payment may be made in cash,
            check or, in whole or in part, in Common Stock of the Company
            owned by the person exercising the option, valued at fair
            market value.  All directors of Osmonics are reimbursed for
            expenses of attending meetings of the Board of Directors.


            REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
            DIRECTORS ON EXECUTIVE COMPENSATION

               Osmonics' Compensation Committee consists of Messrs.
            Ralph E. Crump and Michael L. Snow.  Mr. Snow is of Counsel
            in the law firm of Maslon Edelman Borman & Brand, a Limited
            Liability Partnership, which rendered legal services to the
            Osmonics during the last fiscal year. 

               Decisions on compensation of Osmonics' executives
            generally have been made by the Compensation Committee (the
            "Compensation Committee") of the Board, except that decisions
            regarding the granting of stock options have been and will be
            made by the Stock Option Committee.  Each member of the
            Compensation Committee is a non-employee director.  All
            decisions by the Compensation Committee relating to the
            compensation of Osmonics' executive officers are reviewed by
            the full Board.  Pursuant to recently adopted rules designed
            to enhance disclosure of Osmonics' policies toward executive
            compensation, set forth below is a report prepared by the
            Board of Directors addressing Osmonics', and its
            subsidiaries', compensation policies for the year ended
            December 31, 1998 as they affected Osmonics' executive
            officers. 

               The Compensation Committee's executive compensation
            policies are designed to provide competitive levels of
            compensation that integrate pay with Osmonics' annual
            objectives and long-term goals, reward above average
            corporate performance, recognize individual initiative and
            achievements, and assist Osmonics in attracting and retaining
            qualified executives.  Targeted levels of executive
            compensation are set at levels that the Compensation
            Committee believes to be consistent with others in Osmonics'
            industry and other manufacturing companies in the Twin Cities
            metropolitan area.

               There are three elements in Osmonics' executive
            compensation program, all determined by individual and
            corporate performance.

               - Base salary compensation
               - Annual incentive compensation
               - Stock options

               Total compensation opportunities are competitive with
            those offered by employers of comparable size, growth and
            profitability in our industry.

               Base salary compensation is determined by the potential
            impact the individual has on Osmonics, the skills and
            experiences required by the job, and the performance and
            potential of the incumbent in the job. 

               Annual incentive compensation for executives of Osmonics
            and its subsidiaries is based primarily on corporate
            operating earnings and sales growth but also includes an
            overall assessment by the Board of Directors of executive
            management's performance, as well as market conditions. 

               Awards of stock options under the Stock Option Plan are
            designed to promote the identity of long-term interests
            between Osmonics' executives and its shareholders and assist
            in the retention of executives.  The Stock Option Plan also
            permits the Committee to grant stock options to key
            personnel.  The Compensation Committee makes recommendations
            to the Stock Option Committee regarding the granting of stock
            options to executives and key personnel.  These
            recommendations may result in the granting of such options. 
            Options become exercisable based upon criteria established by
            Osmonics.

               The Compensation Committee surveys employee stock option
            programs of companies with similar capitalization to Osmonics
            prior to recommending to grant options to the executives. 
            While the value realizable from exercisable options is
            dependent upon the extent of which Osmonics' performance is
            reflected in the market price of Osmonics' Common Stock at
            any particular point in time, the decision as to whether such
            value will be realized in any particular year is primarily
            determined by each individual executive and not by the
            Compensation Committee.  Accordingly, when the Committee
            recommends that an option be granted to an executive, that
            recommendation does not take into account any gains realized
            that year by that executive as a result of his or her
            individual decision to exercise an option granted in a
            previous year.

                The 1998 cash compensation paid to Mr. Spatz was
            $314,807 which represents a 19% decrease from his 1997 cash
            compensation.  Although his base compensation increased 4%
            from 1997 to reflect the growth of the Company and the extra
            effort involved in recent acquisitions, the Committee advised
            a decrease of $84,000 in his bonus in response to the sales
            performance and the lower earnings per share in 1998. 

                In August 1998, the Stock Option Committee granted
            options under the Employee Plan to purchase 15,000 shares of
            Common Stock to Mr. Spatz, 10,000 options to each of
            Kenton C. Toomey, Vice President Operations, Bjarne N.
            Nicolaisen, Vice President International, and Andrew T.
            Rensink, Vice President Quality and Regulatory Affairs, and
            7,000 options to L. Lee Runzheimer, Chief Financial Officer,
            respectively.  The Stock Option Committee believed it is in
            the best long-term interests of the Company's shareholders to
            provide incentives to these executives. 


                                                          Ralph E. Crump
                                                          Michael L. Snow




            STOCK PERFORMANCE GRAPH

                The following line-graph presentation comparing
            cumulative, five-year return to Osmonics' shareholders (based
            on appreciation of the market price of Osmonics' Common
            Stock) on an indexed basis with (i) a broad equity market
            index and (ii) an appropriate published industry or line-of-
            business index, or peer group index constructed by Osmonics.
             The following presentation compares Osmonics' Common Stock
            price in the five-year period from December 31, 1993 to
            December 31, 1998, to the S&P 500 Stock Index and to a peer
            group index created by Osmonics over the same period.  The
            peer group index consists of the common stock of Calgon
            Carbon Corporation, Cuno, Inc., Hach Co., Ionics, Inc.,
            Millipore Corp., Pall Corp., Sybron Chemical, U.S. Filter
            Corp., and Waterlink, Inc.  All peer group corporations are
            involved in various aspects of the water treatment or liquid
            separations businesses and associated product lines.  The
            presentation assumes that the value of an investment in each
            of Osmonics' Common Stock, the S&P 500 Index, and the peer
            group index was $100 on December 31, 1993, and that any
            dividend paid (none have been paid by Osmonics) were re-
            invested in the same security.


            End of Fiscal:   1993    1994     1995     1996     1997     1998
            --------------   ----  -------  -------  -------  -------  -------

            Osmonics, Inc.   $100  $ 99.72  $136.59  $147.48  $106.00  $ 56.57

            S&P 500          $100  $101.32  $139.40  $171.40  $228.59  $293.91
 
            Peer Group       $100  $104.97  $156.56  $170.01  $152.44  $138.72



            SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

               Section 16(a) of the Securities Exchange Act of 1934
            requires Osmonics' officers and directors, and persons who
            own more than ten percent of a registered class of Osmonics'
            equity securities, to file reports of ownership and changes
            in ownership with the Securities and Exchange Commission and
            the New York Stock Exchange.  Officers, directors and
            greater-than-ten-percent shareholders are required by SEC
            regulation to furnish Osmonics with copies of all Section
            16(a) forms they file.  Based solely on review of the copies
            of such forms furnished to Osmonics, or written
            representations that no Forms 5 were required, Osmonics
            believes that during the year ended December 31, 1998, all
            Section 16(a) filing requirements applicable to its officers,
            directors and greater-than-ten-percent beneficial owners were
            complied with.


                                INDEPENDENT AUDITORS

               Deloitte & Touche LLP has served as independent auditors
            for the Company since August 27, 1987.  A representative of
            Deloitte & Touche LLP is expected to attend this year's
            Annual Meeting of Shareholders and have an opportunity to
            make a statement and/or respond to appropriate questions from
            shareholders.  Shareholder approval is not required for the
            appointment of independent auditors, since the Board of
            Directors has the responsibility for selecting auditors.


                                SHAREHOLDER PROPOSALS

               Any proposal by a shareholder to be presented at the
            Annual Meeting of Shareholders must be received at Osmonics'
            principal executive offices, 5951 Clearwater Drive,
            Minnetonka, Minnesota 55343-8995, no later than December 1,
            1999, and otherwise have complied with the requirements of
            Rule 14a-8.

               On May 21, 1998, the Securities and Exchange Commission
            amended Rule 14a-4 of the Securities Exchange Act of 1934. 
            The amendment governs the Company's use of its discretionary
            proxy voting authority with respect to a shareholder proposal
            which the shareholder has not sought to include in the
            Company's Proxy Statement.  The new amendment provides that
            if a proponent of a proposal fails to notify the Company at
            least 45 days prior to the month and day of mailing of the
            prior year's Proxy Statement of a shareholder proposal, then
            the management proxies will be allowed to use their
            discretionary voting authority when the proposal is raised at
            the meeting, without any discussion of the matter in the
            Proxy Statement. 

               With respect to the Company's 2000 Annual Meeting of
            Shareholders, if the Company is not provided notice of a
            stockholder proposal which the stockholder has not previously
            sought to include in the Company's Proxy Statement by
            February 15, 2000, the management proxies will be allowed to
            use their discretionary authority as outlined above.


            By Order of the Board of
            Directors of Osmonics, Inc.



            D. Dean Spatz
            Chairman of the Board and
            Chief Executive Officer