Abstract: A method of removing water from lubricants, coolants and the like consisting of the following described steps. Firstly, pass lubricants through a heater at a predetermined flow rate to decrease its viscosity. Secondly, pass the heated lubricants through a vertical separation vessel which agitates the lubricants such that water entrained in the lubricants is released as steam. Thirdly, recirculate the heated lubricants repeatedly through the separation vessel at a recirculation flow rate that exceeds by many times the flow rate through the heater, thereby improving the degree of separation of water from the lubricants with each pass through the separation vessel. Fourthly, draw lubricants periodically from the separation vessel as the flow rate through the heater permits.