SCHEDULE 14A INFORMATION

Proxy Statement Pursuant 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
[ ] Confidential, for Use of the Commission Only (as permitted by 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Section 240.14(a)-11(c) or to
Section 240.14(a)-12

ECHELON CORPORATION
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(Name of Registrant as Specified In Its Charter

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

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[X] No fee required.
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ECHELON CORPORATION

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 11, 2001
9:30 A.M. PACIFIC TIME

We cordially invite you to attend the 2001 Annual Meeting of Stockholders
of Echelon Corporation. The meeting will be held on Monday, June 11, 2001 at
9:30 a.m., Pacific Time at our principal executive offices located at 415
Oakmead Parkway, Sunnyvale, California 94086. At the meeting we will:

1. Elect three Class C directors for a term of three years and until their
successors are duly elected and qualified;

2. Ratify the appointment of Arthur Andersen LLP as independent public
accountants for the fiscal year ending December 31, 2001; and

3. Transact any other business as may properly come before the meeting or
any postponement or adjournment thereof.

These items are fully discussed in the following pages, which are made part
of this Notice. Stockholders who owned our common stock at the close of
business on Monday, April 16, 2001 may attend and vote at the meeting. If you
will not be attending the meeting, we request that you vote your shares as
promptly as possible. You may be eligible to vote your shares in a number of
ways. You may mark your votes, date, sign and return the Proxy or voting
instruction form. If you have shares registered directly with our transfer
agent, Mellon Investor Services LLC ("Mellon"), you may choose to vote those
shares via the Internet at Mellon's voting Web site
(http://www.proxyvoting.com/elon), or you may vote telephonically, within the
U.S. and Canada only, by calling 1-800-840-1208 (toll-free). If you hold our
shares with a broker or bank, you may also be eligible to vote via the
Internet or to vote telephonically if your broker or bank participates in the
proxy voting program provided by ADP Investor Communication Services. If your
shares of common stock are held in an account with a broker or a bank
participating in the ADP Investor Communication Services program, you may
choose to vote those shares via the Internet at ADP Investor Communication
Services' voting Web site (www.proxyvote.com) or telephonically by calling the
telephone number shown on your voting form. See "Voting Via the Internet or By
Telephone" in the Proxy Statement for further details. Any stockholder
attending the meeting may vote in person, even though he, she or it has
already returned a Proxy.

Sincerely,

M. Kenneth Oshman
Chairman of the Board, President and
Chief Executive Officer

Sunnyvale, California
April 30, 2001

ECHELON CORPORATION

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PROXY STATEMENT
FOR
2001 ANNUAL MEETING OF STOCKHOLDERS

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INFORMATION CONCERNING SOLICITATION AND VOTING

General

Our Board of Directors is soliciting Proxies for the 2001 Annual Meeting of
Stockholders to be held at our principal executive offices located at 415
Oakmead Parkway, Sunnyvale, California 94086 on Monday, June 11, 2001, at 9:30
a.m., Pacific Time, and at any postponement or adjournment thereof. Our
telephone number at this address is 408-938-5200. This Proxy Statement
contains important information for you to consider when deciding how to vote
on the matters set forth in the attached Notice of Annual Meeting. Please read
it carefully.

Proxy materials, which include the Proxy Statement, Proxy, letter to
stockholders and Form 10-K for the fiscal year ended December 31, 2000, were
first mailed to stockholders on or about April 30, 2001.

Costs of Solicitation

We will pay the costs of soliciting Proxies from stockholders. We are
required to request brokers and nominees who hold our common stock in their
name to furnish our Proxy materials to beneficial owners of such common stock.
We may reimburse such firms and nominees for their reasonable expenses in
forwarding the Proxy materials to these beneficial owners. Certain of our
directors, officers and employees may solicit Proxies on our behalf, without
additional compensation, personally or by written communication, telephone,
facsimile or other electronic means.

QUESTIONS AND ANSWERS

Q: Who can vote at the meeting?

A: The Board set April 16, 2001 as the record date for the Annual Meeting. All
stockholders who owned Echelon Common Stock on April 16, 2001 may attend
and vote at the Annual Meeting. Each stockholder is entitled to one vote
for each share of common stock held on all matters to be voted on. On April
16, 2001, 38,511,343 shares of our common stock were outstanding.

Q: How many votes do you need to hold the meeting?

A: Shares are counted as present at the meeting if you:

-- are present and vote in person at the meeting; or

-- have properly submitted a Proxy Card or voted by telephone or via the
Internet.

A majority of Echelon's outstanding shares as of the record date must be
present at the meeting in order to hold the meeting and conduct business. This
is called a quorum.

Q: What proposals will be voted on at the meeting?

A: There are two proposals scheduled to be voted on at the meeting:

-- Election of the nominees for director set forth in this Proxy
Statement; and

--Ratification of the appointment of Arthur Andersen LLP as our independent
public accountants for the fiscal year ending December 31, 2001.

Q: What is the voting requirement to approve each of the proposals?

A: For the election of directors, the three (3) individuals receiving the
highest number of "FOR" votes will be elected. Proposal Two requires the
affirmative "FOR" vote of a majority of the shares of our outstanding
common stock represented, in person or by proxy, and entitled to vote.

Q: How are votes counted?

A: You may vote either "FOR" or "AGAINST" each nominee for the Board of
Directors. You may vote "FOR," "AGAINST" or "ABSTAIN" on the other
proposal. If you abstain from voting on the other proposal, it has the same
effect as a vote against. If you just sign your Proxy Card with no further
instructions, your shares will be counted as a yes vote "FOR" each Director
and "FOR" ratification of the appointment of our independent public
accountants. If you do not vote and you hold your shares in a brokerage
account in your broker's name (this is called "street name"), your shares
will not be counted in the tally of the number of shares cast "FOR,"
"AGAINST" or "ABSTAIN" on any proposal where your broker does not have
discretionary authority to vote, and therefore will have the effect of
reducing the number of shares needed to approve any of those items.
However, these shares may be counted for the purpose of establishing a
quorum for the meeting. Voting results are tabulated and certified by our
transfer agent, Mellon Investor Services LLC.

Q: How can I vote my shares in person at the meeting?

A: Shares held directly in your name as the stockholder of record may be voted
in person at the meeting. If you choose to do so, please bring the enclosed
Proxy Card or proof of identification to the meeting. If you hold your
shares in street name, you must request a legal proxy from your stockbroker
in order to vote at the meeting.

Q: How can I vote my shares without attending the meeting?

A: Whether you hold shares directly as a stockholder of record or beneficially
in street name, you may vote without attending the meeting. You may vote by
granting a proxy or, for shares held in street name, by submitting voting
instructions to your stockbroker or nominee. In most cases, you will be
able to do this by telephone, using the Internet or by mail. Please refer
to the summary instructions included on your Proxy Card. For shares held in
street name, the voting instruction card will be included by your
stockbroker or nominee.

BY TELEPHONE OR THE INTERNET--If you have telephone or Internet access,
you may submit your proxy by following the "Vote by Telephone" or "Vote by
Internet" instructions on the Proxy Card.

BY MAIL--You may do this by signing your Proxy Card or, for shares held
in street name, by following the voting instruction card included by your
stockbroker or nominee and mailing it in the enclosed, postage prepaid
envelope. If you provide specific voting instructions, your shares will be
voted as you have instructed.

Q: How can I change my vote after I return my Proxy Card?

A: You may revoke your proxy and change your vote at any time before the final
vote at the meeting. You may do this by signing a new Proxy Card with a
later date or by attending the meeting and voting in person. Attending the
meeting will not revoke your proxy unless you specifically request it.

Q: What is Echelon's voting recommendation?

A: Our Board of Directors recommends that you vote your shares "FOR" each of
the three nominees to the Board and "FOR" ratification of the appointment
of Echelon's independent public accountants.

Q: Where can I find the voting results of the meeting?

A: The preliminary voting results will be announced at the meeting. The final
results will be published in our first quarterly report on Form 10-Q filed
after the date of the meeting.

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS

Our stockholders may submit proposals that they believe should be voted
upon at the Annual Meeting or nominate persons for election to our Board of
Directors. Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
as amended ("Rule 14a-8"), some stockholder proposals may be eligible for
inclusion in our 2002 Proxy Statement. Any such stockholder proposals must be
submitted in writing to the attention of the Assistant Secretary, Echelon
Corporation, 415 Oakmead Parkway, Sunnyvale, California 94086, no later than
December 31, 2001, or the date which is 120 calendar days prior to the
anniversary of the mailing date of this Proxy Statement. Stockholders
interested in submitting such a proposal are advised to contact knowledgeable
legal counsel with regard to the detailed requirements of applicable
securities laws. The submission of a stockholder proposal does not guarantee
that it will be included in our 2002 Proxy Statement.

Alternatively, under our Bylaws, a proposal or a nomination that the
stockholder does not seek to include in our 2002 Proxy Statement pursuant to
Rule 14a-8 may be submitted in writing to the Assistant Secretary, Echelon
Corporation, 415 Oakmead Parkway, Sunnyvale, California 94086, for the 2002
Annual Meeting of Stockholders not less than 60 days nor more than 120 days
prior to the anniversary of the date on which we first mail our proxy
materials for this year's Annual Meeting. For our 2002 Annual Meeting, this
means that any such proposal or nomination will be considered untimely if
submitted to us earlier than December 31, 2001 or later than March 1, 2002.
Note, however, that in the event we provide less than 70 days notice or prior
public disclosure to stockholders of the date of the 2002 Annual Meeting, any
stockholder proposal or nomination not submitted pursuant to Rule 14a-8 must
be submitted to us not later than the close of business on the tenth day
following the day on which notice of the date of the 2002 Annual Meeting was
mailed or public disclosure was made. For example, if we provide notice of our
2002 Annual Meeting on April 15, 2002, for a 2002 Annual Meeting on May 30,
2002, any such proposal or nomination will be considered untimely if submitted
to us after April 25, 2002. For purposes of the above, "public disclosure"
means disclosure in a press release reported by the Dow Jones News Service,
Associated Press or a comparable national news service, or in a document
publicly filed by us with the Securities and Exchange Commission (the "SEC").
As described in our Bylaws, the stockholder submission must include certain
specified information concerning the proposal or nominee, as the case may be,
and information as to the stockholder's ownership of our common stock. If a
stockholder gives notice of such a proposal after the deadline computed in
accordance with our Bylaws (the "Bylaw Deadline"), the stockholder will not be
permitted to present the proposal to the stockholders for a vote at the 2002
Annual Meeting.

The rules of the SEC rules also establish a different deadline for
submission of stockholder proposals that are not intended to be included in
our Proxy Statement with respect to discretionary voting (the "Discretionary
Vote Deadline"). The Discretionary Vote Deadline for the 2002 Annual Meeting
is March 16, 2002, or the date which is 45 calendar days prior to the
anniversary of the mailing date of this Proxy Statement. If a stockholder
gives notice of such a proposal after the Discretionary Vote Deadline, our
Proxy holders will be allowed to use their discretionary voting authority to
vote against the stockholder proposal when and if the proposal is raised at
the Annual Meeting.

Because the Bylaw Deadline is not capable of being determined until we
publicly announce the date of our 2002 Annual Meeting, it is possible that the
Bylaw Deadline may occur after the Discretionary Vote Deadline. In such a
case, a proposal received after the Discretionary Vote Deadline but before the
Bylaw Deadline would be eligible to be presented at the 2002 Annual Meeting
and we believe that our Proxy holders at such meeting would be allowed to use
the discretionary authority granted by the Proxy to vote against the proposal
at such meeting without including any disclosure of the proposal in the Proxy
Statement relating to such meeting.

We have not been notified by any stockholder of his, her or its intent to
present a stockholder proposal from the floor at the 2001 Annual Meeting. The
enclosed Proxy grants the Proxy holders discretionary authority to vote on any
matter properly brought before the 2001 Annual Meeting, including any
stockholder proposals received between the date of this Proxy Statement and
the Bylaw Deadline for the 2001 Annual Meeting, which is May 10, 2001, or the
date which is ten calendar days after the date this Proxy Statement is mailed.

PROPOSAL ONE

ELECTION OF DIRECTORS

General

We currently have eight members on our Board of Directors. Our Board of
Directors is divided into three classes, with each director serving a three-
year term and one class being elected at each year's Annual Meeting of
Stockholders. Directors Richard M. Moley, Arthur Rock and M. Francesco Tato
are the Class C directors whose terms expire at the Annual Meeting of
Stockholders to be held June 11, 2001. Directors M. Kenneth Oshman and Larry
W. Sonsini are the Class A directors whose terms will expire at the 2002
Annual Meeting of Stockholders, and directors Robert J. Finocchio, Jr., Armas
Clifford Markkula, Jr. and Robert R. Maxfield are the Class B directors whose
terms will expire at the 2003 Annual Meeting of Stockholders. All of the
directors, including the Class C nominees, are incumbent directors. There are
no family relationships among any of our directors or executive officers,
including any of the nominees mentioned above. Unless otherwise instructed,
the holders of Proxies solicited by this Proxy Statement will vote the Proxies
received by them for the three Class C nominees. In the event that any nominee
is unable or declines to serve as a director at the time of the Annual
Meeting, the Proxy holders will vote for a nominee designated by the present
Board of Directors to fill the vacancy. We are not aware of any reason that
any nominee will be unable or will decline to serve as a director. The Board
of Directors recommends a vote "FOR" the election of each of the nominees
listed above.

Nominees

The names of the members of our Board of Directors, including the Class C
nominees, their ages as of April 16, 2001 and certain information about them,
are set forth below.

Name Age Principal Occupation
------------------------------- --- ----------------------------------------

M. Kenneth Oshman.............. 60 Chairman of the Board, President and
Chief Executive Officer of Echelon

Robert J. Finocchio, Jr. (1)... 49 Corporate director, private investor and
part time professor

Armas Clifford Markkula, Vice Chairman of the Board of Directors
Jr. (1)....................... 59 of Echelon

Robert R. Maxfield (2)......... 59 Private investor

Richard M. Moley (2) (3)....... 62 Director of Echelon

Arthur Rock (1) (3)............ 74 Principal of Arthur Rock & Co.

Larry W. Sonsini............... 60 Chairman of the Executive Committee of
Wilson Sonsini Goodrich & Rosati

M. Francesco Tato (3).......... 68 Chief Executive Officer of ENEL S.p.A.

- --------
(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

(3) Denotes nominee for election at the 2001 Annual Meeting of Stockholders.

M. Kenneth Oshman has been President and Chief Executive Officer of our
company since December 1988. Mr. Oshman, with three associates, founded ROLM
Corporation, a telecommunications equipment company, in 1969. He was Chief
Executive Officer, President and a director at ROLM from its founding until
its merger with IBM in 1984. Following the merger, he became a Vice President
of IBM and a member of its Corporate Management Board. He remained in that
position until 1986. Prior to founding ROLM Corporation, Mr. Oshman was a
member of the technical staff at Sylvania Electric Products from 1963 to 1969.
Mr. Oshman also serves as a director of Sun Microsystems, and Knight-Ridder.
Mr. Oshman earned B.A. and B.S.E.E. degrees from Rice University and M.S. and
Ph.D. degrees in Electrical Engineering from Stanford University.

Robert J. Finocchio, Jr. has been a director of our company since August
1999. Mr. Finocchio served as Chairman of the Board of Informix Corporation
from August 1997 to September 2000. From July 1997 until July 1999, Mr.
Finocchio served as President and Chief Executive Officer of Informix. From
December 1988 until May 1997, Mr. Finocchio was employed with 3Com
Corporation, a global data networking company, where he held various
positions, most recently serving as President, 3Com Systems. Mr. Finocchio
also serves as a director of Latitude Communications, Turnstone Systems, and
Resonate. Mr. Finocchio is also a Trustee of Santa Clara University. Mr.
Finocchio holds a B.S. degree in economics from Santa Clara University and an
M.B.A. degree from the Harvard Business School.

Armas Clifford Markkula, Jr. is the founder of our company and has served
as a director since 1988. He has been Vice Chairman of Echelon's Board of
Directors since 1989. Mr. Markkula was Chairman of the Board of Apple
Computer, Inc. from October 1993 to February 1996 and was a director from 1977
to 1997. A founder of Apple, he held a variety of positions there, including
President/Chief Executive Officer and Vice President of Marketing. Prior to
founding Apple, Mr. Markkula was with Intel Corporation as Marketing Manager,
Fairchild Camera and Instrument Corporation as Marketing Manager in the
Semiconductor Division, and Hughes Aircraft as a member of the technical staff
in the company's research and development laboratory. Mr. Markkula received
B.S. and M.S. degrees in Electrical Engineering from the University of
Southern California.

Robert R. Maxfield has been a director of our company since 1989. He was a
co-founder of ROLM Corporation in 1969, and served as Executive Vice President
and a director until ROLM's merger with IBM in 1984. Following the merger, he
continued to serve as Vice President of ROLM until 1988. Since 1988, he has
been a consulting professor in the Engineering-Economic Systems Development
Department at Stanford University, and was a venture partner with Kleiner,
Perkins, Caufield & Byers from 1989 to 1992. Dr. Maxfield received B.A. and
B.S.E.E. degrees from Rice University, and M.S. and Ph.D. degrees in
Electrical Engineering from Stanford University.

Richard M. Moley has been a director of our company since February 1997.
Since August 1997, Mr. Moley has been a private investor. From July 1996 to
August 1997, he served as Senior Vice President, Wide Area Business Unit and
as a director of Cisco Systems, following Cisco Systems' purchase of
StrataCom, Inc., where he was Chairman of the Board, Chief Executive Officer
and President. Mr. Moley also serves as a director of Linear Technology, Inc.
and Netro Corporation. Mr. Moley received a B.S. degree in Electrical
Engineering from Manchester University, an M.S. degree in Electrical
Engineering from Stanford University and an M.B.A. degree from Santa Clara
University.

Arthur Rock has been a director of our company since December 1988. Mr.
Rock has been Principal of Arthur Rock & Co., a venture capital firm, since
1969. Mr. Rock serves as a Director Emeritus of Intel Corporation. Mr. Rock
received a B.S. degree in Political Science and Finance from Syracuse
University and an M.B.A. degree from Harvard University.

Larry W. Sonsini has been a director of our company since August 1993. Mr.
Sonsini serves as Chairman of the Executive Committee of the law firm of
Wilson Sonsini Goodrich & Rosati, where he has practiced since 1966. Mr.
Sonsini also serves as a director of Brocade Communications Systems, Commerce
One, Lattice Semiconductor Corporation, Novell, Pixar, and TIBCO Software. Mr.
Sonsini received an A.B. degree in Political Science and Economics and an
L.L.B. degree from the University of California at Berkeley.

M. Francesco Tato has been a director of our company since September 2000.
Mr. Tato has been Chief Executive Officer of ENEL S.p.A., the Italian
electric, gas, water and TLC utility, since June 1996. He was in the Olivetti
group, an Italian information technology corporation, from 1956 to 1982, where
he served as Vice President International Marketing of Olivetti General
Electric, Managing Director of Olivetti Austria, British Olivetti and Deutsche
Olivetti, and later Executive Vice President International Business of the
Olivetti Group. From 1982 to 1984, Mr. Tato served as Chairman of the Board of
Mannesman Kienzle. From 1984 to 1986 and from 1991 to 1996, he was CEO of
Arnoldo Mondadori Editore, one of Europe's leading publishing houses, serving
also as CEO of the parent company, Fininvest Group, from 1993 to 1995. He also
served as Chairman of the Board of Triumph Adler (Olivetti Group) from 1986 to
1989. Mr. Tato is the author of several books on management and holds a degree
in Philosophy from the University of Pavia, Italy.

Board Meetings and Committees

The Board of Directors held six meetings in 2000. Each director is expected
to attend each meeting of the Board and those Committees on which he serves.
Each incumbent director attended at least 75% of the Board and Committee
meetings during 2000, except for Mr. Sonsini, who attended 67% of the meetings
held by the Board, and Mr. Tato, who attended 50% of the meetings held by the
Board during that portion of 2000 in which he served on the Board of
Directors. Certain matters were approved by the Board of Directors or a
Committee of the Board of Directors by unanimous written consent. The Board of
Directors currently has a standing Audit Committee and a Compensation
Committee. The Audit Committee has a written charter that has been approved by
the Board of Directors. The Board of Directors has no Nominating Committee or
committee performing similar functions. Each committee is described as
follows:

Number of
Meetings
in
Name of Committees Fiscal
and Members Functions of the Committees 2000
- ------------------ --------------------------- ---------

AUDIT --monitors and reviews corporate financial 3
Robert J. Finocchio, reporting and internal and external
Jr. (1) audits;
Armas Clifford --provides the Board of Directors the
Markkula, Jr. results of its examinations and
Arthur Rock recommendations;
--outlines to the Board of Directors
improvements made, or to be made, in
internal accounting controls;
--nominates independent auditors; and
--provides the Board of Directors with
other information and materials necessary
to make the Board of Directors aware of
significant financial matters.

COMPENSATION --reviews and approves the executive 3
Robert R. Maxfield compensation policies; and
Richard M. Moley --administers the employee stock option
plan.

Director Compensation

We do not currently pay compensation to directors for serving in that
capacity. Nonemployee directors are eligible to participate in our 1998
Director Option Plan which provides for the automatic grant of an option to
purchase 25,000 shares of Common Stock to each nonemployee director who first
becomes a nonemployee director after May 29, 1998. Each nonemployee director
shall automatically be granted a 10,000 share option on the date of each
annual meeting of stockholders, provided he or she is re-elected to the Board
of Directors or otherwise remains on the Board on such date and provided that
on such date he or she shall have served on the Board for at least the
preceding six months. All options granted under this plan are fully vested.
During 2000, Mr. Finocchio, Mr. Markkula, Mr. Maxfield, Mr. Moley, Mr. Rock
and Mr. Sonsini were each granted a 10,000 share option at a per share
exercise price of $30.25 and Mr. Tato was granted a 25,000 share option at a
per share exercise price of $41.25.

PROPOSAL TWO

RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

At the recommendation of the Audit Committee of the Board of Directors, the
Board of Directors has appointed Arthur Andersen LLP as our independent public
accountants to audit our consolidated financial statements for the fiscal year
ending December 31, 2001, and recommends that the stockholders vote "FOR"
ratification of such appointment.

Arthur Andersen LLP has audited our financial statements since 1988. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement if he or she so desires
and is expected to be available to respond to appropriate questions from the
stockholders.

SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT

To our knowledge, the following table sets forth certain information with
respect to beneficial ownership of our common stock, as of March 31, 2001,
for:

. each person who we know beneficially owns more than 5% of our common
stock;

. each of our directors;

. each of our named executive officers; and

. all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC
and includes voting or investment power with respect to the securities. Except
as indicated by footnote, and subject to applicable community property laws,
each person identified in the table possesses sole voting and investment power
with respect to all shares of common stock shown held by them. The number of
shares of common stock outstanding used in calculating the percentage for each
listed person includes shares of common stock underlying options or warrants
held by such person that are exercisable within 60 calendar days of March 31,
2001, but excludes shares of common stock underlying options or warrants held
by any other person. Percentage of beneficial ownership is based on 38,409,906
shares of common stock outstanding as of March 31, 2001.

Shares Percentage
Beneficially Beneficially
Name Owned Owned
- ---- ------------ ------------

5% Stockholders:
ENEL S.p.A. (1)..................................... 3,000,000 7.8%

Directors and Executive Officers:
M. Kenneth Oshman (2)............................... 5,920,261 15.1%
M. Francesco Tato (1)(3)............................ 3,025,000 7.8%
Armas Clifford Markkula, Jr. (4).................... 1,792,038 4.7%
Beatrice Yormark (5)................................ 1,031,441 2.7%
Oliver R. Stanfield (6)............................. 1,000,541 2.6%
Arthur Rock (7)..................................... 742,563 1.9%
Robert R. Maxfield (8).............................. 453,966 1.2%
Frederik Bruggink (9)............................... 308,541 *
Peter A. Mehring (10)............................... 256,000 *
Lawrence Y.H. Chan (11)............................. 243,125 *
Richard M. Moley (12)............................... 160,589 *
Larry W. Sonsini (13)............................... 42,761 *
Robert J. Finocchio, Jr. (14)....................... 35,000 *
All directors and executive officers as a group (15
persons) (15)...................................... 15,251,156 37.3%

- --------
* Less than 1%.

(1) Principal address is Viale Regina Margherita 137, Rome, Italy 00198. Mr.
Tato, a director of our company, is the Chief Executive Officer of ENEL
and serves on ENEL's Board of Directors. Mr. Tato disclaims beneficial
ownership of the shares held by ENEL except to the extent of his
pecuniary interest in ENEL.

(2) Mr. Oshman's principal address is c/o Echelon Corporation, 415 Oakmead
Parkway, Sunnyvale, CA 94086. Includes 4,582,120 shares held by M.
Kenneth Oshman and Barbara S. Oshman, Trustees of the Oshman Trust dated
July 10, 1979, and 488,428 shares held by O-S Ventures, of which Mr.
Oshman is general partner. Excludes an aggregate of 36,000 shares held by
trusts, not for the benefit of Mr. Oshman, of which Mr. Oshman serves as
trustee. Includes a warrant to purchase 249,713 shares of common stock
exercisable within 60 calendar days of March 31, 2001. Includes options
to purchase 600,000 shares of common stock exercisable within 60 calendar
days of March 31, 2001, of which 134,375 are vested at March 31, 2001.

(3) Includes an option to purchase 25,000 shares of common stock exercisable
within 60 calendar days of March 31, 2001, all of which are vested at
March 31, 2001.

(4) Includes 1,587,427 shares held by Armas Clifford Markkula, Jr. and Linda
Kathryn Markkula, Trustees of the Restated Arlin Trust Dated December 12,
1990, and 151,928 shares held by the Markkula Family Limited Partnership.
Mr. and Mrs. Markkula disclaim beneficial ownership of all but 27,500 of
the shares held by the Markkula Family Limited Partnership. Includes a
warrant to purchase 40,183 shares of common stock exercisable within 60
calendar days of March 31, 2001. Includes options to purchase 12,500
shares of common stock exercisable within 60 calendar days of March 31,
2001, all of which are vested at March 31, 2001. We have the right, but
not the obligation, to repurchase 1,250 shares owned by Mr. Markkula if
he should cease to serve on our Board of Directors. This repurchase right
expires on April 23, 2001.

(5) Includes 715,400 shares held by Justin C. Walker and Beatrice Yormark,
Trustees of the Walker-Yormark Family Trust Dated October 2, 1992.
Includes options to purchase 316,041 shares of common stock exercisable
within 60 calendar days of March 31, 2001, of which 207,184 shares are
vested at March 31, 2001.

(6) Includes an aggregate of 170,600 shares held in individual retirement
accounts for the benefit of Mr. Stanfield and his wife. Includes options
to purchase 308,541 shares of common stock exercisable within 60 calendar
days of March 31, 2001, of which 199,684 shares are vested at March 31,
2001.

(7) Includes 20,000 shares held by a trust for the benefit of Mr. Rock's
wife, of which Mr. Rock serves as trustee, and as to which Mr. Rock
disclaims beneficial ownership. Excludes 2,000 shares held by a trust,
not for the benefit of Mr. Rock, of which Mr. Rock serves as trustee.
Includes a warrant to purchase 29,187 shares of common stock exercisable
within 60 calendar days of March 31, 2001. Includes options to purchase
25,000 shares of common stock exercisable within 60 calendar days of
March 31, 2001, all of which are vested at March 31, 2001. We have the
right, but not the obligation, to repurchase 1,250 shares owned by Mr.
Rock if he should cease to serve on our Board of Directors. This
repurchase right expires on April 23, 2001.

(8) Includes a warrant to purchase 15,736 shares exercisable within 60
calendar days of March 31, 2001. Includes options to purchase 25,000
shares of common stock exercisable within 60 calendar days of March 31,
2001, all of which are vested at March 31, 2001. We have the right, but
not the obligation, to repurchase 1,250 shares owned by Dr. Maxfield if
he should cease to serve on our Board of Directors. This repurchase right
expires on April 23, 2001.

(9) Includes options to purchase 173,541 shares of common stock exercisable
within 60 calendar days of March 31, 2001, of which 102,187 shares are
vested at March 31, 2001.

(10) Includes options to purchase 200,000 shares of common stock exercisable
within 60 calendar days of March 31, 2001, of which 49,999 shares are
vested at March 31, 2001.

(11) Includes options to purchase 193,125 shares of common stock exercisable
within 60 calendar days of March 31, 2001, of which 95,934 shares are
vested at March 31, 2001.

(12) Includes a warrant to purchase 10,000 shares of common stock exercisable
within 60 calendar days of March 31, 2001. Includes options to purchase
50,000 shares of common stock exercisable within 60 calendar days of
March 31, 2001, of which 43,750 shares are vested at March 31, 2001.

(13) Includes options to purchase 30,000 shares of common stock exercisable
within 60 calendar days of March 31, 2001, of which 28,750 shares are
vested at March 31, 2001.

(14) Represents options to purchase 35,000 shares of common stock exercisable
within 60 calendar days of March 31, 2001, all of which shares are vested
at March 31, 2001.

(15) Includes warrants to purchase an aggregate of 344,819 shares of common
stock exercisable within 60 calendar days of March 31, 2001. Includes
options to purchase an aggregate of 2,137,208 shares of common stock
exercisable within 60 calendar days of March 31, 2001, of which 1,054,775
shares are vested at March 31, 2001. We have the right, but not the
obligation, to repurchase an aggregate of 13,125 shares owned by our
officers and directors if such officers and directors should discontinue
their employment with our company or cease to serve on our Board of
Directors. This repurchase right expires on various dates through
December 17, 2001.

OTHER INFORMATION

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our executive officers, directors and persons who own more than 10% of a
registered class of our equity securities to file certain reports regarding
ownership of, and transactions in, our securities with the SEC. Such officers,
directors and 10% stockholders are also required by the SEC to furnish us with
copies of all Section 16(a) forms that they file.

Based solely on our review of such forms furnished to us and written
representations from certain reporting persons, we believe that all filing
requirements applicable to our executive officers, directors and more than 10%
stockholders were complied with during fiscal year 2000.

Certain Transactions

Loans to Employees

In March 1998, Peter Mehring, our Vice President of Engineering, was
granted an option to purchase 200,000 shares of common stock pursuant to our
1997 Stock Plan at a per share exercise price of $2.00. The option vests
ratably over four years and provides for the exercise of unvested shares. In
April 1998, Mr. Mehring exercised an option for 50,000 unvested shares and
executed a promissory note in the principal amount of $100,000 payable to our
company. The note was a full recourse note, was secured by the shares and bore
interest at the annual rate of 5.7%. The note and the accrued interest thereon
were paid off in full on January 31, 2001.

In December 2000, we advanced $300,000 to Mr. Mehring against his scheduled
full compensation for calendar year 2001. The advance will be deemed repaid to
our company in 24 equal installments of $12,500 on each Echelon payroll date
during 2001. In the event of Mr. Mehring's termination of employment, any
unpaid amount of the advance shall be repaid within ten days of the effective
date of such termination, following which date any unpaid amount shall bear
interest at the rate of 10% per annum until repaid in full. As of March 31,
2001, $225,000 of the advance remained unpaid.

In April 2001, we loaned Mr. Mehring an aggregate of $1,000,000 which Mr.
Mehring will use for paying his federal income taxes. Mr. Mehring issued to us
two promissory notes, one of which is secured by a second deed of trust on his
primary residence and the other of which is secured by a second deed of trust
on a second

residence. Each note is in the principal amount of $500,000 and bears interest
at the rate of 4.54% per annum, compounded monthly. The interest accruing
under each note is due and payable in monthly installments over the three year
term of the note, and the principal is due and payable on April 6, 2004,
subject to earlier repayment upon the occurrence of certain events.

In December 2000, we loaned Thad Starkey, our Vice President of Operations,
$250,000 which Mr. Starkey will use for paying his California state income
taxes. Mr. Starkey issued to us a promissory note secured by a second deed of
trust on his primary residence. The note bears interest at the rate of 6.10%
per annum, compounded monthly. The interest accruing under the note is due and
payable in monthly installments over the three year term of the note, and the
principal is due and payable on December 29, 2003, subject to earlier
repayment upon the occurrence of certain events.

In April 2001, we loaned Mr. Starkey $500,000 which Mr. Starkey will use
for paying his federal income taxes. Mr. Starkey issued to us a promissory
note secured by Mr. Starkey's personal property. The note bears interest at
the rate of 4.54% per annum, compounded monthly. The interest accruing under
the note is due and payable in monthly installments over the three year term
of the note, and the principal is due and payable on April 16, 2004, subject
to earlier repayment upon the occurrence of certain events.

Agreements with ENEL

Pursuant to a research and development and technological cooperation
agreement, dated June 28, 2000, between our company and ENEL Distribuzione
SpA, an affiliate of ENEL S.p.A. ("ENEL"), we will cooperate with ENEL to
integrate our LonWorks system into ENEL's remote metering management project
in Italy. Under this project, ENEL intends to provide digital electricity
meters and a complete home networking infrastructure to Italian households
over a three-year period. We believe that revenue for the year ending December
31, 2001 arising out of this project may be approximately 30% of our revenue
for the year.

Pursuant to a common stock purchase agreement, dated June 30, 2000, between
our company and ENEL S.p.A., ENEL agreed to purchase, for cash, 3,000,000
newly issued shares of our common stock for a purchase price to be based on
the average trading price prior to the closing (subject to a minimum price of
$87.3 million and a maximum price of $130.9 million). The closing of this
stock purchase occurred on September 11, 2000. Based on the average price of
our common stock prior to that date, the total purchase price for the
3,000,000 shares was $130.9 million and after deducting expenses associated
with the transaction, we received $130.7 million. Until the earlier of
September 11, 2003 or 30 days following the termination of the research and
development and technological cooperation agreement with ENEL Distribuzione,
ENEL shall not, except under limited circumstances, sell or otherwise transfer
such shares. The stock purchase agreement also gives ENEL the right to
nominate a member of our Board of Directors as long as ENEL owns at least two
million shares of our common stock. As a condition to the closing of the stock
purchase agreement, our directors agreed to enter into a voting agreement with
ENEL in which each of them agreed to vote the shares of our company's common
stock that they beneficially own or control in favor of ENEL's nominee to our
Board of Directors. M. Francesco Tato has served as ENEL's representative on
our Board of Directors since September 2000.

Pursuant to a registration rights agreement, dated September 11, 2000,
between our company and ENEL, ENEL may, subject to certain conditions and
limitations, request that we register the shares purchased under the common
stock purchase agreement. In the event we elect to register any of our
securities, ENEL may, subject to certain limitations, include the shares
purchased under the common stock purchase agreement in such registration.

Air Travel Arrangement

From time to time, Mr. Oshman uses private air travel services for business
trips for himself and for any employees accompanying him. These private air
travel services are provided by certain entities controlled by Mr. Oshman or
Mr. Markkula. Our net cash outlay with respect to such private air travel
services is no greater than comparable first class commercial air travel
services. Such net outlays to date have not been material.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning the compensation that
we paid during the last three fiscal years to our Chief Executive Officer and
our five other most highly compensated executive officers who earned more than
$100,000 during the fiscal year ended December 31, 2000. All option grants
were made under our 1997 stock plan.

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

M. Kenneth Oshman....... 2000 1(3) -- -- 100,000 1,584
Chairman of the Board, 1999 1(3) -- -- 150,000 1,584
President 1998 248,000 10,947 -- 100,000 1,623
and Chief Executive
Officer

Lawrence Y.H. Chan...... 2000 220,000 -- 110,054 30,000 1,726
Vice President, Asia 1999 210,000 -- 124,628 50,000 1,584
Pacific and 1998 210,000 20,000 44,686 35,000 897
Japan

Frederik H. Bruggink.... 2000 220,000 -- 88,640 50,000 1,584
Vice President, Europe, 1999 210,000 -- 89,952 50,000 1,584
Middle East 1998 210,000 20,000 20,739 35,000 1,584
and Africa

Peter A. Mehring........ 2000 275,000 -- -- 50,000 1,320
Vice President, 1999 250,000 -- -- 75,000 1,307
Engineering 1998 203,125 -- -- 225,000 749

Oliver R. Stanfield..... 2000 275,000 -- -- 50,000 1,386
Vice President of 1999 260,000 -- -- 75,000 1,386
Finance and 1998 240,000 10,594 -- 50,000 1,425
Chief Financial Officer

Beatrice Yomark......... 2000 275,000 -- -- 50,000 1,531
Vice President of 1999 260,000 -- -- 75,000 1,531
Marketing and 1998 240,000 10,594 -- 50,000 1,571
Sales

- --------
(1) Consists of sales commissions.

(2) Consists of premiums paid by the Company for life insurance coverage.

(3) Mr. Oshman requested that his total cash compensation for the fiscal years
ending December 31, 1999 and 2000 be set at $1.00.

Option Grants in Last Fiscal Year

The following table sets forth certain information with respect to stock
options granted to our Chief Executive Officer and our five most highly
compensated executive officers during the fiscal year ended December 31,
2000. We have never granted any stock appreciation rights. All option grants
were made under our 1997 stock plan.

Individual Grants(1)
------------------------------------------------
Potential
Realizable Value
At Assumed Annual
Rates of Stock
Number of % of Total Price
Securities Options Appreciation For
Underlying Granted to Exercise Option Term
Options Employees Price Per ($)(5)
Granted In Fiscal Year Share Expiration -----------------
Name (#) (%)(3) ($)(4) Date 5% 10%
- ---- ---------- -------------- --------- ---------- ------- ---------

M. Kenneth Oshman....... 100,000(2) 5.9 30.25 04/27/05 835,752 1,846,793
Lawrence Y.H. Chan...... 30,000 1.8 30.25 04/27/05 250,726 554,038
Frederik H. Bruggink.... 50,000 2.9 30.25 04/27/05 417,876 923,396
Peter A. Mehring........ 50,000(2) 2.9 30.25 04/27/05 417,876 923,396
Oliver R. Stanfield..... 50,000 2.9 30.25 04/27/05 417,876 923,396
Beatrice Yormark........ 50,000 2.9 30.25 04/27/05 417,876 923,396

- --------
(1) All of these options were granted on April 27, 2000 and vest as to one-
fourth of the shares on April 27, 2001 and as to one-forty-eighth of the
shares at the end of each month thereafter, subject to the employee's
continued employment with our company.

(2) This option may be exercised prior to full vesting, subject to the
optionee entering into a restricted stock purchase agreement with respect
to unvested shares.

(3) Based on a total of 1,704,975 options granted to all employees in the
fiscal year ended December 31, 2000.

(4) The exercise price per share is equal to the closing price of our common
stock on the market trading day immediately preceding the date of grant.

(5) Potential gains are net of the exercise price but before taxes associated
with the exercise. The 5% and 10% assumed annual rates of compounded stock
appreciation based upon the deemed fair market value are mandated by the
rules of the SEC and do not represent our estimate or projection of the
future common stock price. Actual gains, if any, on stock option exercises
are dependent on our future financial performance, overall market
conditions and the option holders' continued employment through the
vesting period. There can be no assurance that the amounts reflected in
this table will be achieved.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The following table sets forth our Chief Executive Officer and our five
other most highly compensated executive officers information concerning shares
acquired upon exercise of stock options in the fiscal year ended December 31,
2000 and exercisable and unexercisable options held as of December 31, 2000.

Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired on Value December 31, 2000 (#)(2) December 31, 2000 ($)(3)
Exercise Realized -------------------------- -------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- --------- ----------- ------------- ----------- -------------

M. Kenneth Oshman....... -- -- 350,000(4) -- 2,256,175 --
Lawrence Y.H. Chan...... -- -- 185,000(5) 30,000 2,233,413 --
Frederik H. Bruggink.... 65,000 3,353,338 295,000(6) 50,000 3,861,138 --
Peter A. Mehring........ 100,000 9,150,000 150,000(7) 50,000 901,525 703,125
Oliver R. Stanfield..... 69,600 2,460,938 355,400(8) 50,000 4,506,328 --
Beatrice Yormark........ 82,500 3,156,375 342,500(9) 50,000 4,317,181 --

- --------
(1) The value realized is based on the closing price of our common stock on
the date of exercise, minus the per share exercise price, multiplied by
the number of shares exercised.

(2) All options granted under our 1988 stock option plan and certain options
granted to our officers under our 1997 stock plan may be exercised
immediately upon grant and prior to full vesting, subject to the optionee
entering into a restricted stock purchase agreement with respect to
unvested shares.

(3) The value of underlying securities is based on the $16.0625 per share
closing price of our common stock on December 29, 2000 (the last market
trading day in 2000) minus the aggregate exercise price.

(4) Includes 118,750 vested shares and 231,250 unvested shares as of December
31, 2000.

(5) Includes 90,622 vested shares and 94,378 unvested shares as of December
31, 2000.

(6) Includes 231,875 vested shares and 63,125 unvested shares as of December
31, 2000.

(7) Includes 43,750 vested shares and 106,250 unvested shares as of December
31, 2000.

(8) Includes 252,272 vested shares and 103,128 unvested shares as of December
31, 2000.

(9) Includes 239,372 vested shares and 103,128 unvested shares as of December
31, 2000.

Compensation Committee Interlocks and Insider Participation

During 2000, the Compensation Committee was comprised of Robert R. Maxfield
and Richard M. Moley, both of whom were nonemployee directors. No interlocking
relationship exists between any member of our Board of Directors or
Compensation Committee and the Board of Directors or Compensation Committee of
any other company, nor has any such interlocking relationship existed in the
past.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Compensation Committee sets the compensation of our Chief Executive
Officer, reviews the design and effectiveness of compensation programs for
other key executives, and approves stock option grants for our employees. The
Committee is comprised entirely of outside directors who have never served as
officers of our company.

The goals of the Compensation Committee are to align compensation with our
performance and objectives and to attract, retain and reward executive
officers and employees whose contributions are critical to the long-term
success of our company.

The primary components of our executive compensation package are salary,
commissions for sales executives and stock options. We set our compensation
package to be competitive with the marketplace.

Salary

The level of base salary for executive officers is set based upon their
scope of responsibility, level of experience and individual performance. The
salary range for each position is reviewed against the Radford Survey (a
third-party compensation survey) data for high-tech companies with similar
sales volumes located in the same geographic area. Additionally, the
Compensation Committee takes into account general business and economic
conditions and current circumstances of our company.

Commission for sales executives

Our 2000 sales commission plan provided the opportunity for commission
payments based on meeting our revenue objectives. These plans were set at the
beginning of the fiscal year.

Stock options

The Compensation Committee believes that the granting of stock options is
an important method of rewarding and motivating our employees by aligning
employees' interests with our stockholders. The

Compensation Committee also recognizes that a stock incentive program is a
necessary element in a competitive compensation package. The program utilizes
a vesting schedule to encourage our employees to continue in the employ of our
Company and to encourage employees to maintain a long-term perspective. In
determining the size of stock option grants, the Compensation Committee
focuses primarily on the employees' current and expected future value to our
company. The Compensation Committee also considers the number of unvested
options held by the employee.

Compensation of the Chief Executive Officer

On December 16, 1999, Mr. Oshman requested that his total compensation for
the fiscal year ending December 31, 2000 be set at $1.00.

In April 2000, the Compensation Committee, in consultation with the Board
of Directors, granted Mr. Oshman an option to purchase 100,000 shares of our
common stock at an exercise price of $30.25, the then current fair market
value. Twenty-five percent of the option vests on April 27, 2001. The option
vests at a rate of 1/48 per month thereafter until fully vested on April 27,
2004.

On December 14, 2000, Mr. Oshman requested that his total compensation for
the fiscal year ending December 31, 2001 be set at $1.00.

Compensation Committee

Robert R. Maxfield
Richard M. Moley

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The Audit Committee of our Board of Directors serves as the representative
of our Board for general oversight of our financial accounting and reporting
process, system of internal control, audit process, and process for monitoring
compliance with laws and regulations. Our management has primary
responsibility for preparing our financial statements and our financial
reporting process. Our independent accountants, Arthur Andersen LLP, are
responsible for expressing an opinion on the conformity of our audited
financial statements to generally accepted accounting principles.

In this context, the Audit Committee hereby reports as follows:

1. The Audit Committee has reviewed and discussed the audited financial
statements with our management.

2. The Audit Committee has discussed with the independent accountants the
matters required to be discussed by SAS 61 (Codification of Statements
on Auditing Standard, AU 380).

3. The Audit Committee has received the written disclosures and the letter
from the independent accountants required by Independence Standards
Board Standard No. 1 (Independence Standards Board Standard No.1,
Independence Discussions with Audit Committees) and has discussed with
the independent accountants the independent accountants' independence.

4. Based on the review and discussion referred to in paragraphs (1) through
(3) above, the Audit Committee recommended to our Board of Directors,
and our Board has approved, that the audited financial statements be
included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, for filing with the SEC.

Each of the members of the Audit Committee is independent as defined under
the listing standards of the National Association of Securities Dealers.

Audit Committee

Robert J. Finocchio, Jr.
Armas Clifford Markkula, Jr.
Arthur Rock

AUDIT AND RELATED FEES

Audit Fees

Arthur Andersen LLP billed us an aggregate of $152,500 in fees for
professional services rendered in connection with the audit of our financial
statements for the most recent fiscal year and the reviews of the financial
statements included in each of our Quarterly Reports on Form 10-Q during the
fiscal year ended December 31, 2000.

Financial Information Systems Design and Implementation Fees

Arthur Andersen LLP did not provide any services in connection with the
design and implementation of financial information systems during 2000.

All Other Fees

Arthur Andersen LLP billed us an aggregate of $138,700 in fees for tax
compliance and consulting services rendered to us and our affiliates for the
fiscal year ended December 31, 2000.

The Audit Committee has determined that the provision of information
technology services and other non-audit services is compatible with Arthur
Andersen LLP's independence.

STOCK PRICE PERFORMANCE GRAPH

The graph below compares the cumulative total stockholder return on our
common stock with the cumulative total return on the S&P 500 Index and the S&P
Technology 500 (comprised of those companies in the technology sector of the
S&P 500 Index). The graph assumes that $100 was invested in our common stock
on July 27, 1998, the effective date of our initial public offering, and in
the S&P 500 Index and the S&P Technology 500, including reinvestment of
dividends. Historic stock price performance is not necessarily indicative of
future stock price performance.

[PERFORMANCE GRAPH APPEARS HERE]

INDEXED RETURNS
Company / Index
Quarter ------------------------------------------------------
Ending Echelon Corp. S&P 500 Index S&P Technology Index
- ----------- ------------- ------------- --------------------
Base Period

27 Jul 1998 $100.00 $100.00 $100.00
Sep 1998 28.57 88.91 93.08
Dec 1998 55.36 107.85 124.87
Mar 1999 142.86 113.22 139.73
Jun 1999 95.54 121.20 155.80
Sep 1999 108.93 113.63 162.70
Dec 1999 279.46 130.54 218.68
Mar 2000 935.71 133.53 247.39
Jun 2000 827.69 129.99 225.16
Sep 2000 419.64 128.73 194.39
Dec 2000 229.46 118.65 131.32

OTHER MATTERS

As of the date hereof, the Board of Directors is not aware of any other
matters to be submitted at the Annual Meeting. If any other matters properly
come before the meeting, it is the intention of the persons named in the
enclosed Proxy to vote the shares they represent as the Board of Directors
recommends or as they otherwise deem advisable.

VOTING VIA THE INTERNET OR BY TELEPHONE

For Shares Directly Registered in the Name of the Stockholder

Stockholders with shares registered directly with Mellon Investor Services
LLC ("Mellon") may vote those shares telephonically by calling 1-800-840-1208
(within the U.S. and Canada only, toll-free), or via the Internet at Mellon's
voting Web site (http://www.proxyvoting.com/elon).

For Shares Registered in the Name of a Broker or a Bank

A number of brokers and banks are participating in a program provided
through ADP Investor Communication Services that offers telephone and Internet
voting options. This program is different from the program provided by Mellon
for shares registered directly in the name of the stockholder. If your shares
are held in an account with a broker or a bank participating in the ADP
Investor Communication Services program, you may vote those shares
telephonically by calling the telephone number shown on the voting form
received from your broker or bank, or via the Internet at ADP Investor
Communication Services' voting Web site (www.proxyvote.com).

General Information for All Shares Voted Via the Internet or By Telephone

Votes submitted via the Internet or by telephone must be received by 11:59
p.m., Eastern Time, on June 8, 2001. Submitting your proxy via the Internet or
by telephone will not affect your right to vote in person should you decide to
attend the Annual Meeting. The telephone and Internet voting procedures are
designed to authenticate stockholders' identities, to allow stockholders to
give their voting instructions and to confirm that stockholders' instructions
have been recorded properly. Our legal counsel has advised us that the
Internet voting procedures that have been made available through Mellon are
consistent with the requirements of applicable law. Stockholders voting via
the Internet should understand that there may be costs associated with
electronic access, such as usage charges from Internet access providers and
telephone companies, that must be borne by the stockholder.

THE BOARD OF DIRECTORS

Sunnyvale, California
April 30, 2001

Appendix A

ECHELON CORPORATION

CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS

Purpose:

The Audit Committee will make such examinations as are necessary to monitor
the corporate financial reporting and the internal and external audits of
Echelon Corporation (including any subsidiaries) ("Echelon"), to provide to
the Board of Directors the results of its examinations and related
recommendations, to outline to the Board improvements made, or to be made, in
internal accounting controls, to nominate independent auditors, and to provide
to the Board such additional information and materials as it may deem
necessary to make the Board aware of significant financial matters that
require Board attention.

In addition, the Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board of Directors
from time to time determines.

Membership:

The Audit Committee will consist of at least three (3) members of the
Board, all of whom shall be independent as that term is defined by the rules
of the National Association of Securities Dealers. The members of the Audit
Committee will be appointed by and will serve at the discretion of the Board
of Directors.

Each member of the Audit Committee shall be financially literate and at
least one member must also have accounting or related financial management
experience. Financial literacy shall mean the ability to read and understand
financial statements including Echelon's balance sheet, income statement and
cash flow statement or become so able within a reasonable period after joining
the committee. The past experience criterion shall be past employment in
finance or accounting, requisite professional certification in accounting or
comparable experience, or background that results in the individual's
financial sophistication, including being or having been a Chief Executive
Officer, Chief Financial Officer or other senior officer with financial
oversight responsibilities.

Responsibilities:

The independent auditor is ultimately accountable to the Board of Directors
and the Audit Committee. The responsibilities of the Audit Committee shall
include:

1. Review on a continuing basis the adequacy of Echelon's system of
internal controls.

2. Review on a continuing basis the requirement to have an internal audit
function, and, to the extent there is an internal audit function,
review on an ongoing basis the activities, organizational structure and
qualifications of Echelon's internal audit function. To the extent
reports from an internal audit function are completed, review the
summary findings from completed internal audits and progress reports on
the implementation of their conclusions.

3. Periodically review the accounting principles, policies and practices
followed by the company in accounting for and reporting its business
activities. In addition, review major proposed changes in accounting or
reporting principles and policies.

4. Ensure that Echelon fulfills its responsibilities for the fair and
accurate presentation of financial statements in accordance with
generally accepted accounting principles and SEC rules and regulations.
This includes:

-- Review of period financial reports (e.g. 10Q, 10K, Annual Report to
Shareholders), proxy materials, and select other public documents
containing Echelon financial information.

Management and/or the auditors shall fully review with the Audit
Committee any significant changes in accounting policies or methods
that would materially affect reported results prior to the issuance
of period financial reports.

-- Review with management and independent auditors significant
adjustments, estimates, new accounting policies, management
adjustments or disagreements, if any, prior to any public
announcement of such financial results.

5. Review significant suggestions for improvements provided by independent
auditors to management. Periodically monitor the status and progress of
Echelon on said suggestions for improvements.

6. Annually evaluate and recommend the approval of independent auditors to
the Board of Directors and shareholders. Review the scope, cost,
results and effectiveness of the annual audit, together with all other
professional services fees by the accounting firm and/or consulting
affiliates.

7. Ensure the independent auditors submit a formal written statement
consistent with Independence Standard Board No. 1 regarding
relationships and services which may affect objectivity and
independence. Discuss any relevant matters with the independent
auditors and recommend that the full Board take appropriate action to
ensure the independence of the auditor.

8. Review, in conjunction with counsel, any legal matters that could have
a significant impact on Echelon's financial statements, including
without limitation compliance with any disclosure obligations,
regulatory obligations, and the corporate code of conduct, reviewing
any related party transactions for potential conflicts of interest, and
if necessary, instituting special investigations and, if appropriate,
hiring special counsel or experts to assist.

9. Provide oversight and review of Echelon's asset management policies,
including an annual review of Echelon's investment policies and
performance for cash and short-term investments.

10. Perform other oversight functions as requested by the full Board of
Directors.

In addition to the above responsibilities, the Audit Committee will
undertake such other duties as the Board of Directors delegates to it, and
will report, at least annually, to the Board regarding the Committee's
examinations and recommendations.

Meetings:

The Audit Committee will meet at least two times each year. The Audit
Committee may establish its own schedule which it will provide to the Board of
Directors in advance.

The Audit Committee will meet separately with the Chief Executive Officer
and separately with the Chief Financial Officer of Echelon at least annually
to review the financial affairs of Echelon. The Audit Committee will meet with
the independent auditors of Echelon at such times as it deems appropriate, to
review the independent auditor's examination and management report.

Reports:

The Audit Committee will record its summaries of recommendations to the
Board in written form which will be incorporated as a part of the minutes of
the Board of Directors meeting at which those recommendations are presented.

Minutes:

The Audit Committee will maintain written minutes of its meetings, which
minutes, as well as any actions by unanimous written consent, will be filed
with the minutes of the meetings of the Board of Directors.

APPENDIX B
----------
PROXY
ECHELON CORPORATION
2001 Annual Meeting of Stockholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ECHELON CORPORATION

The undersigned stockholder of Echelon Corporation, a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated April 30, 2001, and hereby appoints M. Kenneth
Oshman and Oliver R. Stanfield, and each of them, proxy and attorney-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 2001 Annual Meeting of
Stockholders of Echelon Corporation to be held on Monday, June 11, 2001, at 9:30
a.m., Pacific Time, at the offices of Echelon Corporation, 415 Oakmead Parkway,
Sunnyvale, California 94086 and at any postponement or adjournment thereof, and
to vote all shares of common stock which the undersigned would be entitled to
vote if then and there personally present, on the matters set forth on the
reverse side, and, in their discretion, upon such other matter or matters which
may properly come before the meeting and any adjournment(s) thereof.

THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS GIVEN, WILL BE
VOTED "FOR" THE ELECTION OF THE SPECIFIED NOMINEES AS DIRECTORS, "FOR" THE
RATIFICATION OF OUR INDEPENDENT PUBLIC ACCOUNTANTS, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.

CONTINUED AND TO BE SIGNED ON THE OTHER SIDE

1. ELECTION OF DIRECTORS:

FOR WITHHELD

[ ] [ ]

Nominees:
01 Richard M. Moley
02 Arthur Rock
03 M. Francesco Tato

Withheld for the nominees you list below; (write nominee(s) name in the
space provided below).

- --------------------------------

2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2001:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

In their discretion, upon such other matter or matters which may properly
come before the meeting and any adjournment(s) thereof.

Signature Signature Dated
-------------------- -------------------- -----------

This Proxy should be marked, dated, signed by the stockholder(s) exactly as its,
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.

Detach here from proxy voting card.

Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week

Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.

Internet
http://www.proxyvoting.com/ELON

Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.

Telephone
1-800-840-1208

Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in
the box below, and then follow the directions given.

Mail

Mark, sign and date your proxy card and return it in
the enclosed postage-paid envelope.

If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.