a system and method for separating free oil from industrial coolant comprises directing said fee oil and coolant through a coalescing cartridge having a plurality of polymeric elements therein into a tank having a plurality of settling chambers . free oil is removed from the coolant through oleophilic attraction between the free oil and the surface of the polymeric elements . free oil remaining in the coolant is further separated from therefrom through gravitational separation . a plurality of weirs and baffles interposed between the settling chambers provide continuous return of purified coolant to the system and periodic decanting of separated free oil .