Abstract: Oil separator assembly for removing and collecting oil entrained in a gas includes a vessel having a cavity with a reservoir formed therein; an inlet pipe extending into the vessel; an inlet diffuser securely attached to the inlet pipe for initially separating the entrained oil from the refrigerant gas; and independent oil and gas outlet ports extending from the vessel for emitting the separated oil and ejecting the substantially oil-free refrigerant gas, respectively. The inlet diffuser includes a conical-shaped hollow member having an open base, a closed end, and a converging side wall extending from the open base to the closed end. Refrigerant gas and entrained oil, received through the open base, gradually impacts on the inner surface of the side wall in a manner sufficient to promote coalescence of the oil. The coalesced oil is directed across the inner surface of the side wall transversely away from the refrigerant gas.