<PAGE>
 
                                                                            1998
--------------------------------------------------------------------------------
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
 
                                   FORM 10-K
 
(Mark One)
 [X]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
                  For the fiscal year ended December 31, 1998
                                       OR
 [_]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
             THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
             For the transition period from           to
                         Commission File Number 1-4957
 
                             NALCO CHEMICAL COMPANY
                     Incorporated in the State of Delaware
                 I.R.S. Employer Identification No. 36-1520480
               One Nalco Center, Naperville, Illinois 60563-1198
                             Telephone 630-305-1000
          Securities registered pursuant to Section 12(b) of the Act:
                                          Name of Each Exchange on Which
         Title of Each Class                        Registered
 
 
  Common Stock par value $0.1875 per    Chicago Stock Exchange New York Stock
                share                                 Exchange
          Securities registered pursuant to Section 12(g) of the Act:
                                      None
   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 the past 90 days.
                               Yes   X   No
   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.   [X]
 
   The aggregate market value of the voting stock held by non-affiliates of the
registrant was $1,812,008,725 at March 5, 1999.*
 
   The number of shares outstanding of each of the issuer's classes of Common
Stock, as of March 5, 1999 was 65,725,414 shares of Common Stock.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
   Portions of the Registrant's 1998 Annual Report to Shareholders are
incorporated by reference into Parts I and II.
 
   Portions of the Registrant's Proxy Statement dated March 29, 1999 for the
April 29, 1999 Annual Meeting of Shareholders are incorporated by reference
into Part III.
--------------
   * Excludes reported beneficial ownership by all directors and executive
     officers of the Registrant; however, this determination does not
     constitute an admission of affiliate status for any of these stockholders.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
 
                               TABLE OF CONTENTS
 
                                     PART I
 
<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
 <C>     <S>                                                                <C>
 Item 1  Business........................................................     1
         Executive Officers of the Registrant............................     3
 Item 2  Properties......................................................     4
 Item 3  Legal Proceedings...............................................     6
 Item 4  Submission of Matters to a Vote of Security Holders.............     6
 
                                    PART II
 
         Market for the Registrant's Common Stock and Related Security
 Item 5  Holder Matters..................................................     6
 Item 6  Selected Financial Data.........................................     6
         Management's Discussion and Analysis of Financial Condition and
 Item 7  Results of Operations...........................................     6
 Item 7A Quantitative and Qualitative Disclosures About Market Risk......     7
 Item 8  Financial Statements and Supplementary Data.....................     7
         Changes in and Disagreements with Accountants on Accounting and
 Item 9  Financial Disclosure............................................     7
 
                                    PART III
 
 Item 10 Directors and Executive Officers of the Registrant..............     7
 Item 11 Executive Compensation..........................................     7
 Item 12 Security Ownership of Certain Beneficial Owners and Management..     7
 Item 13 Certain Relationships and Related Transactions..................     8
 
                                    PART IV
 
 Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.     8
</TABLE>
<PAGE>
 
                                    PART I
 
ITEM 1. BUSINESS.
 
   Nalco Chemical Company was incorporated in 1928 in Delaware and has its
principal executive offices at One Nalco Center, Naperville, Illinois 60563-
1198. Its telephone number is 630-305-1000. As used in this report, "Company"
and "Nalco" refer to Nalco Chemical Company and its consolidated subsidiaries.
 
   Nalco is engaged in the manufacture and sale of highly specialized Service
Chemicals. Specified financial information by business segment and geographic
area is shown in Note 2 of the Notes to Consolidated Financial Statements in
the Company's 1998 Annual Report to Shareholders and is incorporated herein by
reference.
 
   Nalco is in the business of providing services, chemicals, technology,
equipment, and systems (monitoring and surveillance) used in water treatment,
pollution control, energy conservation, steelmaking, papermaking, mining and
mineral processing, electricity generation, other industrial processes and
commercial building utility systems. Service Chemicals are developed,
formulated and manufactured to meet specific customer needs. They are part of
value added programs designed to help customers maintain a high level of
operating performance and efficiency in their facilities, improve the quality
of customers' end products or help customers meet environmental discharge
limits in a cost-effective way. Nalco products are used for purposes such as:
control of scale, corrosion, foam and fouling in cooling systems, boilers and
other equipment; clarification of water; separation of liquids and solids;
improved combustion; control of dust; lubrication and corrosion protection in
rolling, drawing and forming of metals; improving production of pulp and
qualities of paper; recovery of minerals; and specialized process applications
in a variety of industries. Cleaners, sanitizers, metal and plastic finishing
compounds, odor control programs, facility maintenance chemicals, and
functional fluids are provided to manufacturers and commercial and
institutional markets. The quality and on-site availability of technical
expertise provided through highly qualified Nalco personnel are very important
considerations to customers. The effective use of the Company's products
requires a substantial amount of problem solving, monitoring and technical
assistance on the part of Nalco employees.
 
   Service Chemicals are usually marketed through Nalco's own organization
because of the high degree of technical service required. The worldwide field
sales force is trained in the application and use of Nalco Service Chemicals,
and is supported by a marketing and research staff of specialists in the
technology and use of various Nalco Service Chemicals.
 
   Competitive conditions vary for Nalco depending on the industries served
and the products involved. Management believes the Company is one of the most
important worldwide suppliers of water treatment products and Service Chemical
programs, based on estimated sales of comparable products for industrial
customers on the process side (e.g., the manufacturing process, which a plant
uses to produce its end product) and the water treatment side (e.g., boilers
for power generation or cooling systems for process temperature control). The
Company sells its products and Service Chemical programs in more than 120
countries, and is the largest or second largest supplier of those products in
most of the countries it does business. All aspects of this business are
considered to be very competitive, and companies providing similar products or
programs range in size from very large multinational companies to small local
manufacturers. The number of competitors varies by product application and
ranges from a few large companies to hundreds of small local companies. The
Company's principal method of competition is based on quality service, product
performance and technology through safe, practical applied science.
 
   In January 1998, the Company completed the acquisitions of USF Houseman
Waterbehandeling BV (Houseman), a Dutch water treatment company based in
Bergen op Zoom, Holland, and Trident Chemical Company (Trident) of Baton
Rouge, Louisiana. Houseman provides boiler and cooling water chemicals and
services to office buildings, retail outlets and manufacturing facilities
throughout Holland, Spain and Belgium. Houseman has annual sales of more than
$4 million. Trident manufactures and markets water treatment chemicals and
services to refinery, petrochemical and utility customers throughout the Gulf
Coast region of the United States. Trident has annual sales of approximately
$8 million.
 
                                       1
<PAGE>
 
   In February 1998, the Company completed the merger of its South African
water treatment interest with those of Chemical Services Limited. The merged
entity, Nalco-Chemserve, is South Africa's largest specialty chemicals
company. Annual 1998 sales were approximately $29 million.
 
   In March 1998, the Company completed the acquisition of Polo Citrus
Corporation, a company which specializes in dust control products and
applications and process aids which control dust during mining, processing,
handling and transportation of minerals, sand and gravel, coal and other large
materials. Polo Citrus has annual sales of approximately $3 million.
 
   In April 1998, the Company completed the acquisitions of Paper Chemicals,
Inc., and the related business of Paper Chemicals of Alabama, Inc., in
Texarkana, Texas; Texo Corporation in Cincinnati, Ohio; and UNICO Corporation,
in Seoul, South Korea. Paper Chemicals provides specialty chemical products to
the pulping, bleaching and recovery process areas of the pulp and paper
industries, and has annual sales in excess of $30 million dollars. Texo
provides specialty and performance chemicals to manufacturers and commercial
and institutional customers, and has annual sales of over $30 million. UNICO
provides wastewater treatment products for basic and middle markets and is a
supplier of paper retention aids, and has annual sales in excess of $8
million.
 
   In May 1998, the Company acquired the water treatment business of Diversey
Lever Limited in the United Kingdom which serves the needs of middle market
customers such as educational institutions, hospitals, light industries and
food and beverage facilities. Annual sales are in excess of $1 million.
 
   In June 1998, the Company acquired the water treatment business of Bycosin
AB in Karlstad, Sweden and Pacific Chemicals, a division of Pace
International, L.P., in Seattle, Washington. Bycosin, with annual sales of
approximately $1 million, serves the water treatment needs of steel
manufacturers, pulp and papermakers, office buildings, universities, textile
plants and utilities throughout Sweden. Pacific Chemicals supplies water
treatment products and services, and cleaning and sanitizing chemical programs
to the aviation, seafood, hotel and office building industries throughout the
northwestern United States. Annual sales are approximately $3 million.
 
   In July 1998, the Company acquired CSC-Kemico (S.E.A.) Sdn. Bhd., a
Malaysian water treatment company, and the water treatment chemical business
of Inland Aqua-Tech, a Spokane, Washington based middle market water treatment
company. CSC-Kemico serves middle market customers in the palm oil,
electronic, food and beverage, light industrial and office building industries
with annual sales in excess of $2 million. Inland Aqua-Tech provides water
treatment chemicals to textile plants, computer chip manufacturers, food and
beverage plants, hospitals, office buildings and light industrial customers.
Annual sales are approximately $2 million.
 
   In August 1998, the Company acquired ChemAsia Industries Sdn. Bhd. and
United ChemAsia Sdn. Bhd., which are located in Malaysia and which serve
customers in the palm oil, electronics, textiles, food and beverage, light
industrial and office buildings industries. Annual sales are in excess of $4
million.
 
   In October 1998, the Company acquired ACP Products and Services which is
located in North Hampton, England. ACP supplies water treatment products and
services to the middle market as well as industrial cleaners, sanitizers,
metal finishing, forming, drawing and lubricating compounds. Annual sales are
in excess of $1 million.
 
   In December 1998, the Company acquired DuBois Chemical Italiana SpA, a
provider of water treatment products and services to the middle market
throughout Italy and which has annual sales of approximately $5 million;
Tampereen Prossessi-Insinoorit Oy, a water treatment chemicals and services
company serving basic industries in Finland and which has annual sales of
approximately $1 million; and Odor Enviro Technology LLC, located in
Bountiful, Utah and Enviro Fresh, Inc., located in Salt Lake City, Utah, both
of which provide odor control products with annual sales of approximately $1
million.
 
   There were no other significant changes in the markets served or in the
methods of distribution since the beginning of 1998.
 
   Although no single Service Chemicals product represents a material portion
of the business, historically, new product and new market developments have
been designed to increase market penetration and to maintain sales and
earnings growth.
 
                                       2
<PAGE>
 
Other Matters
 
   The principal raw materials used by Nalco ordinarily are available in
adequate quantities from several sources of supply in the United States and in
foreign countries. Purchases of chemicals are made in the ordinary course of
business and in accordance with the requirements of production.
 
   Inventories of Service Chemicals are maintained in Nalco-owned facilities
and in warehouses situated throughout the United States and in countries in
which subsidiaries operate. Shipments to customers may be made from either
manufacturing plants or warehouse stocks.
 
   Nalco owns or is licensed under a large number of patents relating to a
number of products and processes. Nalco's rights under such patents and
licenses are of significant importance in the operation of the business, but
no single patent or license is believed to be material with respect to its
business. Over 800 patents existed at the end of 1998 with remaining durations
ranging from less than one year to 20 years with an average duration of about
10 years.
 
   Nalco's business is considered nonseasonal. Large dollar amounts of
backlogs are unusual since chemicals are normally shipped within a few days of
the receipt of orders. The dollar amount of the normal backlog of orders is
not considered to be significant in relation to the total annual dollar volume
of sales of Nalco.
 
   The Company does not depend upon either a single customer, or very few
customers, for a material part of the business.
 
   Nalco's laboratories are involved in research and development of chemical
products and in providing technical support, including chemical analyses of
water and process samples. Research and development expenses of continuing
operations amounted to $43.7 million in 1998, compared to $43.0 million in
1997 and $41.9 million in 1996.
 
   There were approximately 7,000 persons employed full time by Nalco at the
end of 1998.
 
   Compliance with Federal, State, and local regulations relating to the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, has not had a material effect upon the capital
expenditures, earnings or competitive position of Nalco. There are no material
capital expenditures for environmental control facilities anticipated during
1999. Compliance with increasingly stringent regulations should not have a
material effect upon earnings but may strengthen the competitive position of
Nalco because of available capital and technical resources.
 
   Although inflation is not a significant factor domestically, the Company
adjusts selling prices to maintain profit margins wherever possible.
Investments are made in modern plants and equipment that will increase
productivity and thereby minimize the effect of rising costs. In addition, the
last-in, first-out (LIFO) valuation method is used for some of the Company's
inventories, so that changing material costs are recognized in reported income
and pricing decisions. The impact of inflation in foreign exchange movements
at foreign subsidiaries is managed by minimizing assets exposed to currency
movements and by increasing sales prices to parallel increases in local
inflation rates. The Company emphasizes working capital management, frequent
dividend remittance, timely settlement of intercompany account balances,
foreign currency borrowings and selected hedging. In most hyperinflationary
economies, the rate of local currency devaluation is related to and
approximately equal to the local inflation rate. Therefore, Nalco attempts to
increase its local selling prices to help offset the impact of devaluation on
exposed assets and the impact of increases in local content costs.
 
Executive Officers of the Registrant
 
   The executive officers of the Registrant are named below together with
their principal occupation. During the last 5 years all of the executive
officers have been employed by the Company.
 
   E. J. Mooney has been Chairman of the Board and Chief Executive Officer of
the Company since 1994 and was President from 1990 to December 1998.
 
                                       3
<PAGE>
 
   W. S. Weeber has been Vice Chairman of the Board since December 1998 and
Executive Vice President, Operations Staff since 1993.
 
   S. D. Newlin has been President since December 1998. He was Group Vice
President, President, Specialty Division since January 1998. He had been Group
Vice President, President, Nalco Europe since 1994.
 
   G. M. Brannon has been Group Vice President, President, Industrial Division
since January 1, 1998. He had been Group Vice President, President, Nalco
Pacific since February 1997. He was Vice President, President, Nalco Pacific
from 1994 to 1997.
 
   G. Pinzon has been Group Vice President, President, Nalco Latin America
since February 1997. He had been Vice President, President, Nalco Latin
America since 1994.
 
   J. T. Burns has been Group Vice President and President, Pulp and Paper
Division since February 1999. He was Vice President, President, Pulp and Paper
Division from December 1998 through January 1999. He had been Vice President,
President, Pacific Division from January 1998 through December 1998. He was
President of Nalco Canada from 1994 to 1998.
 
   W. J. Roe has been Group Vice President and President, Process and Pacific
Divisions since February 1999. He had been Vice President, President, Process
Division since January 1998 and then was also named President, Pacific
Division in December 1998. He was General Manager of the Mining and Mineral
Processing Chemicals Group from 1994 to 1998.
 
   W. E. Buchholz has been Senior Vice President and Chief Financial Officer
since February 1997. He had been Vice President and Chief Financial Officer
since 1993.
 
   The corporate officers of the Registrant are usually elected at the annual
meeting of directors and hold office for a term of one year.
 
   There is no family relationship between any of the executive officers. No
arrangement or understanding exists between the executive officers and any
other person pursuant to which such officers were selected as officers of the
Registrant.
 
   For further information on the executive officers of the Registrant, please
refer to the Inside Back Cover of the Company's 1998 Annual Report to
Shareholders, which is incorporated herein by reference.
 
ITEM 2. PROPERTIES.
 
   Nalco has facilities used to produce and store inventories and service
customer needs at 17 domestic and 24 foreign locations. Primary domestic
manufacturing plants are located in:
 
<TABLE>
<CAPTION>
                                                         Land Area Building Area
                                                          (Acres)     (Sq.Ft.)
                                                         --------- -------------
      <S>                                                <C>       <C>
      Carson, California................................     21        84,000
      Chicago, Illinois.................................     39       750,000
      Garyville, Louisiana..............................    225       170,000
      Paulsboro, New Jersey.............................     14        34,000
      Chagrin Falls, Ohio...............................     13        28,000
</TABLE>
 
   Other domestic manufacturing and/or warehouse facilities are located in:
Oklahoma City, Oklahoma; Charlotte, North Carolina; Jonesboro, Georgia;
Cincinnati, Ohio; Jackson, Michigan; Baton Rouge, Louisiana; Hopewell,
Virginia; Texarkana, Texas; Montgomery, Alabama; Eagan, Minnesota; Vancouver,
Washington; and Oakland, California.
 
                                       4
<PAGE>
 
   The general offices of the Company are located on a 146-acre site in
Naperville, Illinois. This facility includes three five-story buildings
totaling 417,000 square feet. About 317,000 square feet is used for office
space and the balance is used for support services and storage. A power plant
with a cogeneration system (steam and electricity) serves both the Corporate
and Technical Centers and has 31,000 square feet of space.
 
   The primary domestic research facility is located in Naperville, Illinois.
The Naperville Technical Center is adjacent to the Corporate Center and houses
process simulation areas in buildings which total 235,000 square feet.
 
   Primary foreign manufacturing plants, which also generally include
laboratory and office facilities, are located in:
 
<TABLE>
<CAPTION>
                                                         Land Area Building Area
                                                          (Acres)     (Sq.Ft.)
                                                         --------- -------------
      <S>                                                <C>       <C>
      Botany, Australia.................................     10       102,000
      Suzano, Brazil....................................     14        90,000
      Burlington, Canada................................     14       138,000
      Cheshire, England.................................     15       226,000
      Biebesheim, Germany...............................     28       103,000
      Cisterna di Latina, Italy.........................     25       115,000
      Celra, Spain......................................     25       109,000
      Anaco, Venezuela..................................     43        82,000
</TABLE>
 
   Other foreign facilities are located in: Perth, Australia; Buenos Aires,
Argentina; Santiago, Chile; Suzhou, The People's Republic of China; Soledad,
Colombia; Lerma, Mexico; West Bengal, India; Bogor, Indonesia; Kashima, Japan;
Tilburg, the Netherlands; Auckland, New Zealand; Calamba, Laguna, Philippines;
Dammam, Saudi Arabia; Jurong Town, Singapore; Hsin Chu Hsien, Taiwan; and
Maracaibo, Venezuela.
 
   The Company also has a 72,000 square-foot business and technical center on
a 12-acre site in Oegstgeest, the Netherlands. This facility serves customers
throughout Europe.
 
   In addition to the property mentioned above, Nalco occupies general and
sales offices and warehouses which are rented under short-term leases. Except
for land leased in Charlotte, North Carolina; the Philippines; Saudi Arabia;
Chile; The People's Republic of China; Eagan, Minnesota; Oakland, California;
Cincinnati, Ohio; and Maracaibo, Venezuela, all other real property (including
all production facilities) is owned by Nalco.
 
   While the plants are of varying ages, the Company believes that they are
equipped with modern and efficient equipment, and are in good operating
condition and suitable for the purposes for which they are being used.
 
   In 1998, the Company opened a new manufacturing facility in Eagan,
Minnesota and Oakland, California. It purchased facilities in Hopewell,
Virginia; Texarkana, Texas; Montgomery, Alabama; and Baton Rouge, Louisiana.
 
   Consolidation of operations continued in 1998 with the conversion of the
Jonesboro, Georgia manufacturing plant to warehousing operations.
 
   In January 1999 the Company sold a vacant parcel of land at its Kashima,
Japan site. The operations of the Kashima site were not affected by this sale.
 
   In February 1999 the Company sold a vacant parcel of land in Biebesheim,
Germany. The operations of the Biebesheim site were not affected by this sale.
The Company sold its general and sales office in Maurepas, France and is now
renting office space in Maurepas.
 
   Capital expenditures for 1999 should approximate $100 million compared to
the $115 million spent in 1998, if planned sales and earnings for 1999 are
reached.
 
                                       5
<PAGE>
 
ITEM 3. LEGAL PROCEEDINGS.
 
   For information on this item, please refer to Note 19 of the Notes to
Consolidated Financial Statements in the Company's 1998 Annual Report to
Shareholders, which is incorporated herein by reference.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
   Not Applicable.
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
       MATTERS.
 
   The Registrant's Common Stock is listed on the New York and Chicago Stock
Exchanges. The number of holders of record of Common Stock, par value $0.1875
per share, at December 31, 1998 was 4,767. Dividends and Common Stock market
prices, included in the Quarterly Summary appearing on page 43 of the
Company's 1998 Annual Report to Shareholders, are incorporated herein by
reference.
 
ITEM 6. SELECTED FINANCIAL DATA.
 
   Selected Financial Data, including net sales, earnings from continuing
operations, earnings from continuing operations per common share, total
assets, long-term debt and cash dividends paid, are reported in the Eleven
Year Summary on pages 40 and 41 of the Company's 1998 Annual Report to
Shareholders and are incorporated herein by reference.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
       RESULTS OF OPERATIONS.
 
 Financial Condition and Results of Operations
 
   Management's discussion and analysis of financial condition and results of
operations, which is included in the section titled "Management's Discussion
and Analysis--1998 vs. 1997," "Management's Discussion and Analysis--1997 vs.
1996" and "Management's Discussion and Analysis--Financial Condition," on
pages 17 to 20 of the Company's 1998 Annual Report to Shareholders, is
incorporated herein by reference.
 
 Liquidity and Capital Resources
 
   Management's discussion of liquidity and capital resources, which is
included in the section titled "Management's Discussion and Analysis--Cash
Flows" on pages 20 and 21 of the Company's 1998 Annual Report to Shareholders,
is incorporated herein by reference.
 
 Year 2000 Compliance
 
   Management's discussion of the effects of the Year 2000 Issue, which is
included in the section titled "Management's Discussion and Analysis--Year
2000 Compliance" on pages 21 and 22 of the Company's 1998 Annual Report to
Shareholders, is incorporated herein by reference.
 
 EURO Currency
 
   Management's discussion of the effects of the Euro currency, which is
included in the section titled "Management's Discussion and Analysis--Euro
Conversion" on page 22 of the Company's Annual Report to Shareholders, is
incorporated herein by reference.
 
                                       6
<PAGE>
 
 Forward-Looking Statements
 
   Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Annual Report contain forward-looking
statements that are based on current expectations, estimates and assumptions
regarding the worldwide economy, technological innovation, competitive
activity, interest rates, pricing, currency movements, and the development of
certain markets. These statements are not guarantees of future results or
events, and involve certain risks and uncertainties which are difficult to
predict and many of which are beyond the control of the Company. Actual
results and events could differ materially from those anticipated by the
forward-looking statements.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
   Management's discussion of its market risk exposures and its risk
management strategies, which is included in the section titled "Management's
Discussion and Analysis--1998 vs. 1997" on page 18 of the Company's 1998
Annual Report to Shareholders, is incorporated herein by reference.
 
   The Registrant's market-risk-sensitive instruments do not subject the
Registrant to material market risk exposures.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
   The Report of Independent Accountants, the Consolidated Financial
Statements and the Notes to Consolidated Financial Statements of the
Registrant and its subsidiaries, included in the Company's 1998 Annual Report
to Shareholders, are incorporated herein by reference.
 
   The Quarterly Summary in the Company's 1998 Annual Report to Shareholders
is incorporated herein by reference.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
       FINANCIAL DISCLOSURE.
 
   None.
 
                                   PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
   Item 10 information is set forth in Part I, Item 1, under Executive
Officers of the Registrant and also in the Company's Proxy Statement dated
March 29, 1999, under Election of Directors through Election of Directors--
Meeting of the Board and Committees of the Board, which is incorporated herein
by reference.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
   The information contained under Election of Directors--Directors'
Remuneration and Retirement Policies through Election of Directors--Change in
Control in the Company's Proxy Statement dated March 29, 1999, with respect to
executive compensation and transactions, is incorporated herein by reference
in response to this item.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
   The information contained under Shares Outstanding and Voting Rights in the
Company's Proxy Statement dated March 29, 1999, with respect to security
ownership of certain beneficial owners and management, is incorporated herein
by reference in response to this item.
 
                                       7
<PAGE>
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
   None.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
   (a)(1) The following consolidated financial statements of the Registrant
and its subsidiaries included in the Company's 1998 Annual Report to
Shareholders are incorporated herein by reference in Item 8:
 
     Statements of Consolidated Financial Condition
      December 31, 1998 and 1997
     Statements of Consolidated Earnings
      Years ended December 31, 1998, 1997 and 1996
     Statements of Consolidated Cash Flows
      Years ended December 31, 1998, 1997 and 1996
     Statements of Consolidated Common Shareholders' Equity
      Years ended December 31, 1998, 1997 and 1996
     Notes to Consolidated Financial Statements
     Quarterly Summary (Unaudited)
      Years ended December 31, 1998 and 1997
     Report of Independent Accountants
 
   (2) The following consolidated financial statement schedule for the years
1998, 1997 and 1996 is submitted herewith:
 
     Report of Independent Accountants on Financial Statement Schedule
 
     Schedule II--Valuation and Qualifying Accounts
 
   All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore
have been omitted.
 
                                       8
<PAGE>
 
   (3) Exhibits
 
<TABLE>
 <C>         <C> <S>
 Exhibit  3A  -- Restated Certificate of Incorporation(/2/)
 Exhibit  3B  -- Certificates of Correction and Amendment to the Restated
                 Certificate of Incorporation(/6/)
 Exhibit  3C  -- Certificate of Designations, Preferences and Rights of Series
                 B ESOP Convertible Preferred Stock(/4/)
 Exhibit  3D  -- Certificate of Designations, Preference and Rights of Series C
                 Junior Participating Preferred Stock(/12/)
 Exhibit  3E  -- By-laws(/9/)
 Exhibit 10A  -- Form of Key Executive Agreement
 10B          -- Agreements to Restore Benefits Reduced by Excess ERISA-Related
                 Limits(/1/)
 10C          -- Form of Death Benefit Agreement(/2/)
 10D          -- Management Incentive Plan(/8/)
 10E          -- Restricted Stock Plan(/6/)
 10F          -- 1982 Stock Option Plan as amended April 26, 1984, January 30,
                 1987, February 12, 1993, and October 17, 1996(/10/)
 10G          -- Deferred Compensation Plan for Directors(/3/)
 10H          -- Supplemental Retirement Income Plan(/5/)
 10I          -- 1990 Stock Option Plan as amended April 23, 1992, February 12,
                 1993, and October 17, 1996(/10/)
 10J          -- Stock Option Plan for Non-Employee Directors(/7/)
 10K          -- Directors Benefit Protection Trust of Nalco Chemical
                 Company(/5/)
 10L          -- Management Benefit Protection Trust of Nalco Chemical
                 Company(/5/)
 10M          -- Restricted Stock Trust of Nalco Chemical Company(/5/)
 10N          -- Performance Share Plan as amended effective February 16, 1996
                 and October 17, 1996(/10/)
 10O          -- Employee Stock Compensation Plan as amended effective January
                 1, 1996 and October 17, 1996(/10/)
 10P          -- Non-Employee Directors Stock Compensation Plan(/8/)
 Exhibit 11   -- Computation of Earnings Per Share
 Exhibit 13   -- Those portions of the 1998 Annual Report to Shareholders
                 expressly incorporated herein by reference
 Exhibit 21   -- Subsidiaries of the Registrant
 Exhibit 23   -- Consent of Independent Accountants
 Exhibit 27A  -- Financial Data Schedule
 Exhibit 99A  -- Notice of Annual Meeting and Proxy Statement(/13/)
 Exhibit 99B  -- September 16, 1996 Letter to Shareholders with Summaries of
                 the Preferred Share Purchase Rights Agreement(/11/)
 Exhibit 99C  -- Form 11-K Annual Report
</TABLE>
Exhibit Nos. 10A-10P constitute management contracts, compensation plans, or
arrangements covering directors and officers of the Company.
 
(b) Reports on Form 8-K filed in the fourth quarter of 1998 are: None
--------
(/1/Incorporated)herein by reference from the Registrant's Form 10-K for the
    year ended 1986.
(/2/Incorporated)herein by reference from the Registrant's Form 10-K for the
    year ended 1987.
(/3/Incorporated)herein by reference from the Registrant's Form 8-K dated July
    24, 1986.
(/4/Incorporated)herein by reference from the Registrant's Form 8-K dated May
    15, 1989.
(/5/Incorporated)herein by reference from the Registrant's Form 10-K for the
    year ended 1990.
(/6/Incorporated)herein by reference from the Registrant's Form 10-K for the
    year ended 1991.
(/7/Incorporated)herein by reference from the Registrant's Form 10-K for the
    year ended 1992.
(/8/Incorporated)herein by reference from the Registrant's Notice of Annual
    Meeting and Proxy Statement dated March 18, 1996.
 
                                       9
<PAGE>
 
(/9/Incorporated)herein by reference from the Registrant's Form 10-Q for the
    quarter ended June 30, 1998.
(/10/Incorporated)herein by reference from the Registrant's Form 10-Q for the
     quarter ended September 30, 1996.
(/11/Incorporated)herein by reference from the Registrant's Form 8-K dated
     June 24, 1996.
(/12/Incorporated)herein by reference from the Registrant's Form 8-A dated
     June 24, 1996.
(/13/Incorporated)herein by reference from the Registrant's Notice of Annual
     Meeting and Proxy Statement dated March 29, 1999.
 
                                      10
<PAGE>
 
                                   SIGNATURES
 
   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                          NALCO CHEMICAL COMPANY
 
                                                       E. J. Mooney
                                          By___________________________________
                                                       E. J. Mooney
                                             Chairman, Chief Executive Officer
 
                                          Date: March 30, 1999
 
   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 30, 1999 by the following persons on
behalf of the Registrant and in the capacities indicated.
 
<TABLE>
<CAPTION>
                   Name                                        Title
                   ----                                        -----
 
 
<S>                                         <C>
              W. E. Buchholz                Senior Vice President and Chief Financial
___________________________________________   Officer
              W. E. Buchholz
 
               R. L. Ratliff                Controller
___________________________________________
               R. L. Ratliff
 
             J. L. Ballesteros              Director
___________________________________________
             J. L. Ballesteros
 
              H. G. Bernthal                Director
___________________________________________
              H. G. Bernthal
 
                H. Corless                  Director
___________________________________________
                H. Corless
 
                H. M. Dean                  Director
___________________________________________
                H. M. Dean
 
             J. P. Frazee, Jr.              Director
___________________________________________
             J. P. Frazee, Jr.
 
                A. L. Kelly                 Director
___________________________________________
                A. L. Kelly
 
                B. S. Kelly                 Director
___________________________________________
                B. S. Kelly
 
              F. A. Krehbiel                Director
___________________________________________
              F. A. Krehbiel
 
               E. J. Mooney                 Director
___________________________________________
               E. J. Mooney
 
               S. D. Newlin                 Director
___________________________________________
               S. D. Newlin
 
                                            Director
___________________________________________
               S. A. Penrose
 
                W. A. Pogue                 Director
___________________________________________
                W. A. Pogue
 
                J. J. Shea                  Director
___________________________________________
                J. J. Shea
 
               W. S. Weeber                 Director
___________________________________________
               W. S. Weeber
</TABLE>
 
                                       11
<PAGE>
 
                     REPORT OF INDEPENDENT ACCOUNTANTS ON
                         FINANCIAL STATEMENT SCHEDULE
 
To the Board of Directors
of Nalco Chemical Company
 
   Our audits of the consolidated financial statements referred to in our
report dated February 6, 1999 appearing on page 42 of the 1998 Annual Report
to Shareholders of Nalco Chemical Company (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedule listed
in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
 
                                          PricewaterhouseCoopers LLP
 
Chicago, Illinois
February 6, 1999
 
                                      12
<PAGE>
 
                    NALCO CHEMICAL COMPANY AND SUBSIDIARIES
 
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
 
<TABLE>
<CAPTION>
         Col. A             Col. B            Col. C             Col. D       Col. E
         ------           ---------- ------------------------ ------------- ----------
                                            Additions
                                     ------------------------
                                                      (2)
                                         (1)        Charged
                          Balance At   Charged     To Other                 Balance At
                          Beginning    To Costs   Accounts--  Deductions--     End
      Description         of Period  and Expenses  Describe     Describe    Of Period
      -----------         ---------- ------------ ----------- ------------- ----------
<S>                       <C>        <C>          <C>         <C>           <C>
Reserves deducted in the
 Statements of
 Consolidated Financial
 Condition from the
 assets to which they
 apply
  Allowance for doubtful
   accounts Year Ended:
                                                  $683,000(A)
    December 31, 1998...  $4,170,000  $3,602,000     6,000(C) $2,411,000(B) $6,050,000
                          ==========  ==========  =========== ============= ==========
                                                              $  938,000(B)
    December 31, 1997...  $4,936,000  $  630,000  $ 22,000(A)    480,000(C) $4,170,000
                          ==========  ==========  =========== ============= ==========
                                                  $738,000(A)
    December 31, 1996...  $4,439,000  $  388,000    17,000(C) $  646,000(B) $4,936,000
                          ==========  ==========  =========== ============= ==========
</TABLE>
--------
Note A--Valuation of assets acquired.
Note B--Excess of accounts written off over recoveries.
Note C--Foreign currency translation adjustments.
 
                                       13