SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C.  20549

                                                         


                                FORM 10-Q


             Quarterly Report Pursuant to Section 13 or 15 (d)
                 of the Securities Exchange Act of 1934
                    For Quarter Ended March 31, 1997

                                   OR

             Transition Report Pursuant to Section 13 or 15 (d)
                 of the Securities Exchange Act of 1934
            For the transition period from         to        

                      Commission File No.  1-12714 


                             OSMONICS, INC                               
            (Exact name of registrant as specified in its charter)

           Minnesota                                41-0955759           
   (State or other jurisdiction of               (I.R.S. Employer
   Incorporation or organization)                Identification Number)

         5951 Clearwater Drive, Minnetonka, MN        55343              
       (Address of principal executive offices)     (Zip Code)

Registrant's telephone number, including area code  (612) 933-2277       


                                   N/A                                   
                 Former name, former address and former
               fiscal year, if changed since last report


     Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports) and 
(2) has been subject to such filing requirements for at least the past
90 days.

                               Yes  X    No     

     Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.  At 
April 30, 1997, 13,932,003 shares of the issuer's Common Stock, 
$0.01 par value, were outstanding.

                              OSMONICS, INC.

                                  INDEX




PART I.  FINANCIAL INFORMATION                                      PAGE

     ITEM I.  FINANCIAL STATEMENTS

              Consolidated Statements of Income -  . . . . . . . .   2
              For the Three Months Ended 
              March 31, 1997 and 1996

              Consolidated Balance Sheets -  . . . . . . . . . . .   3
              March 31, 1997 and December 31, 1996

              Consolidated Statements of Cash Flows  . . . . . . .   4
              For the Three Months Ended 
              March 31, 1997 and 1996

              Notes to Consolidated Financial Statements . . . . .   5

     ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF  . . . . . .   6-8
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS


PART II. OTHER INFORMATION

      ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . .   9


SIGNATURES  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
ITEM I - FINANCIAL STATEMENTS

                             OSMONICS, INC.

                    CONSOLIDATED STATEMENTS OF INCOME
                  (In Thousands Except Per Share Data)




                                            Three Months Ended March 31,

                                                1997            1996 

Sales                                        $42,313          $39,051

Cost of sales                                 25,964           23,027

Gross profit                                  16,349           16,024

Less:                                                

   Selling, general and administrative         9,717            8,333

   Research, development and engineering       2,786            2,504 

Income from operations                         3,846            5,187

Other income (expense)                          (101)             156

Income from continuing operations
   before income taxes                         3,745            5,343

Income taxes                                   1,311            1,708

Income from continuing operations              2,434            3,635

Recovery on discontinued operations              325                -
   
Net income                                   $ 2,759          $ 3,635

Income from continuing operations per
   common and common equivalent share        $  0.17          $  0.25

Recovery on discontinued operations per
   common and common equivalent share        $  0.02                -

Net income per common and common
   equivalent share                          $  0.19          $  0.25

Average common and common equivalent
   shares outstanding                         14,516           14,445

                              OSMONICS, INC.
                       CONSOLIDATED BALANCE SHEETS
                    (In thousands except share data)


                                             March 31,    December 31,
                                               1997          1996      
ASSETS
 
Current assets
  Cash and cash equivalents                 $  2,968        $  5,392 
  Marketable securities                       17,779          19,028 
  Trade accounts receivable, net of  
    allowance for doubtful accounts of 
    $1,102 in 1997, and $907 in 1996          31,176          28,200 
  Inventories                                 34,030          32,322 
  Deferred tax assets                          1,767           1,559 
  Other current assets                         1,880           2,026 

    Total current assets                      89,600          88,527 
Property and equipment, at cost 
  Land and land improvements                   5,506           5,485 
  Building                                    27,475          27,158 
  Machinery and equipment                     52,939          50,045 
  Construction in progress                     4,006           3,438 
                                              89,926          86,126 

  Less accumulated depreciation and 
    amortization                             (35,228)        (34,332)
                                              54,698          51,794 
Other assets                                  19,865          11,855 

                                            $164,163        $152,176 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
  Accounts payable                          $ 11,463        $ 12,511 
  Current debt                                16,891           7,493 
  Reserve for discontinued operations          1,457           1,957 
  Other accrued liabilities                   15,464          12,560 

    Total current liabilities                 45,275          34,521 

Long-term debt                                15,764          15,900 
Other liabilities                                194             196 
Deferred income taxes                          3,950           3,616 
Shareholders' equity
  Common stock, $0.01 par value
    Authorized -- 50,000,000
    Issued -- 1997: 14,215,195 and 
              1996: 14,193,239 shares            142             142 
  Capital in excess of par value              23,439          23,128 
  Retained earnings                           74,540          71,781 
  Treasury Stock                              (1,184)              - 
  Unrealized gain on marketable securities     2,270           2,864 
  Foreign currency translation adjustments      (227)             28 
   Total shareholders' equity                 98,980          97,943 

                                            $164,163        $152,176 
                             OSMONICS, INC.

                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (In Thousands)



                                                   Three Months Ended
                                                       March 31,        
Cash flows from:
                                                  1997           1996   
Operations:
  Net income                                     $ 2,759        $ 3,635 
  Non-cash items included in net income:
    Depreciation and amortization                  1,190          1,206 
    Deferred income taxes                            111            (87)
    Gain on sale of investments                        -           (164)

  Accounts receivable                             (1,439)        (1,262)
  Inventories and other current assets             2,371          1,586 
  Accounts payable and accrued liabilities        (4,084)        (2,640)

  Net cash provided by operations                    908          2,274 
 
Investing activities:
  Business acquisition 
    (net of cash acquired)                       (10,470)             - 
  Purchase of investments                           (317)          (283)
  Sale of investments                                400          3,029 
  Purchase of property and equipment              (1,350)        (6,610)
  Other                                             (125)          (266)

  Cash provided by (used in) investing 
    activities                                   (11,862)        (4,130)

Financing activities:
  Increases in debt                                9,398            514 
  Reduction of debt                                 (136)          (909)
  Issuance of Common Stock                           311            335 
  Purchase of Treasury Stock                      (1,184)             - 

  Net cash provided by (used in) financing
    activities                                     8,389            (60)

Effect of exchange rate changes on cash              141            (20)

Decrease in cash and cash equivalents             (2,424)        (1,936)
Cash and cash equivalents -
  beginning of year                                5,392          4,729 
Cash and cash equivalents -
  end of quarter                                 $ 2,968        $ 2,793 

                             OSMONICS, INC.

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements.  In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.  

Operating results for the three months ended March 31, 1997, are not
necessarily indicative of the results that may be expected for the year
1997.

These statements should be read in conjunction with the financial
statements and related notes included in the Company's Annual Report to
shareholders and Form 10-K for the year ended December 31, 1996.

ITEM II.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS

          (Dollars in thousands except per share amounts)

As an aid to understanding the Company's operating results, the
following table shows the percentage of sales that each income statement
item represents for the three months ended March 31, 1997 and 1996.

                                                 Percent of Sales     
                                                Three Months Ended
                                                     March 31,        
                                               1997              1996

Sales                                         100.0%            100.0%
Cost of sales                                  61.4              59.0  
Gross profit                                   38.6              41.0
                                                 
Selling, general and administrative            23.0              21.3
Research, development and engineering           6.6               6.4 
Operating expenses                             29.6              27.7 
                                                 
Income from operations                          9.0              13.3
Other income (expense)                         (0.2)              0.4 
Income from continuing operations
  before income taxes                           8.8              13.7
Income taxes                                    3.1               4.4 
Income from continuing operations               5.7               9.3
Recovery on discontinued operations             0.8                -  
Net income                                      6.5%              9.3%


Sales

Sales of $42,313 for the quarter ended March 31, 1997 increased 8.4%
from the first quarter of 1996.  Sales generated internally increased
5.4% on a year-to-year comparison.  The acquisition of AquaMatic, Inc.
in late February 1997 contributed an additional 3.0% of the year-to-year
sales increase.

Gross Margin

Gross margin decreased from 41.0% of sales in the first quarter of 1996
to 38.6% of sales in the first quarter of 1997, primarily as a result of
changes in the product line sales mix.  Previously announced price
increases on selected product lines are expected to provide modest
favorable impact beginning in the second quarter.

Operating Expenses

Operating expenses increased from 27.7% of sales in the first quarter of
1996 to 29.6% in the first quarter of 1997.  The primary increase was in
sales and marketing expenses to fund the expansion of the sales
organization and marketing programs.  Part of the increased operating expense
is due to the implementation of the SAP management information
system.  The savings from improved systems should begin to be realized
in the latter part of 1997.  Reductions in operating expense are being
implemented, in response to the lower average gross margins, and slower
rate of sales growth.  

Other Income

Other income was lower by $257,000 for the first quarter of 1997
compared to the first quarter of 1996, primarily due to less gains on
the sale of investments.  

Income Taxes

The effective tax rate for the first quarter 1997 was 35% based on the
forecast for the full year.  This compares to 32.0% in the corresponding
period of 1996, which benefited from remaining tax credits from the
Autotrol acquisition.  

Recovery on Discontinued Operations

The Company recognized $325,000 ($0.02 per share) of after-tax income
from a reduction in the reserve for discontinued operations from the
Autotrol merger after a lawsuit was successfully defended.  

Net Income

Net income for the quarter was $2,759, as compared to $3,635 for the
first quarter of 1996.  Net income per share was $0.19 per share, a
decrease of 25% from the $0.25 per share reported for the same quarter
last year.  

Liquidity and Capital Resources

As of March 31, 1997, the Company had cash, cash equivalents and
marketable securities of $20,747 versus $24,420 at December 31, 1996. 
The current ratio was 2.0 at March 31, 1997, as compared to 2.6 at
year-end 1996. 

The Company's current debt increased from $7,493 at December 31, 1996 to
$16,891 at March 31, 1997.  The increase was due to short-term
borrowings for the AquaMatic acquisition.  

The Company announced on March 17, 1997 that its Board of Directors
authorized purchase of up to 1,500,000 shares of the Company's common
stock.  In March 1997, the Company purchased 68,600 shares and in April
1997, 220,000 shares.  

The Company believes that its current cash and investments position, its
cash flow from operations, and amounts available from bank credit will
be adequate to meet its anticipated cash needs for working capital,
capital expenditures, and potential acquisitions during the foreseeable
future.

Private Securities Litigation Reform Act

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements.  Certain information included in
this Form 10-Q and other materials filed or to be filed with the
Securities and Exchange Commission (as well as information included in
oral or other written statements made or to be made by the Company)
contains statements that are forward-looking.  Such statements may
relate to plans for future expansion, business development activities,
other capital spending, financing, or the effects of regulation and
competition.  Such information involves important risks and
uncertainties that could significantly affect anticipated results in the
future and, accordingly, such results may differ from those expressed in
any forward-looking statements made by or on behalf of the Company. 
These risks and uncertainties include, but are not limited to, those
relating to product development activities, dependence on existing
management, global economic and market conditions, and changes in
federal or state laws.  

                             OSMONICS, INC.

                                 PART II

                            OTHER INFORMATION



Item 6.  Exhibits and Reports on Form 8-K

         (a)  (27) Financial Data Schedule

         (b)  During the quarter ended March 31, 1997 the Registrant did
              not file a Form 8-K report.

                               SIGNATURES


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


Dated:  ________________












                                             OSMONICS, INC.        
                                             (Registrant)




                                /s/ L. Lee Runzheimer              
                                    L. Lee Runzheimer
                                    Chief Financial Officer




                                /s/ Howard W. Dicke                
                                    Howard W. Dicke
                                    Treasurer and Vice President
                                    Corporate Development




                                /s/ D. Dean Spatz                  
                                    D. Dean Spatz
                                    Chief Executive Officer



GSW/dh
finance/10QMAR)F