Contact:

Norman Barta
CEO
Nephros, Inc.
Tel: 212-781-5113

FOR IMMEDIATE RELEASE

Todd Fromer or Garth Russell
KCSA Worldwide
212-896-1215 / 212-896-1250
tfromer@kcsa.com / grussell@kcsa.com

Nephros Selected for Development of Dual Stage Ultra Reliable
Portable Personal Water Filtration by U.S. Marine Corps ATD

$1 Million Department of Defense Appropriation Approved

NEW YORK, October 4, 2006 – Nephros, Inc. (AMEX: NEP), announced today that it will be working with the United States Marine Corps Warfighting Laboratory in Quantico, Va. to develop a portable personal water purification system following the approval of a Federal appropriation totaling $1 million.

The project will be funded under the Department of Defense budget activity for Research, Development, Test & Evaluation (RDT&E), NAVY under the Marine Corps Advanced Technology Demonstration (ATD). Nephros will work in tandem with the United States Marine Corps in developing the water purification system for the warfighter of the future. The appropriation is part of HR5631, the “Department of Defense Appropriations Act, 2007,” signed into law by President Bush on September 29, 2006.

Nephros considers its patented technology to be a significant breakthrough in providing affordable and reliable water filtration. Its proprietary dual stage cold sterilization ultrafilter (“DSU”), which will form the basis for the portable system, is capable of filtering out many viruses, parasites and other bio-toxins in addition to bacteria.

“This is a major milestone for Nephros in the development and recognition of our proprietary dual stage water filtration technology. There are extraordinary obstacles to providing potable, palatable water in a warfighter’s theater of operation,” stated Norman Barta, chief executive officer of Nephros. “Access to a safe water supply is critical to a soldier’s health and ability to complete the mission. Applying our advanced technology to a portable, personal, durable and verifiable water filtration system for the Marines is just one of many opportunities for our robust filtration technology.”

“Potable water is a concern of not only the military, but also for healthcare institutions, the food service industry, emergency services and for personal use. A recent pilot-use program of our DSU at a major university medical center has provided us additional data which will be used in connection with the continued development of our DSU line of products. Independent testing of water filtered at the medical center by our DSU proved that the DSU functions as specified. We are quite encouraged by these results and look forward to working with the Marines to adapt our patented technology to meet their needs,” said William J Fox, Executive Chairman of the Board of Nephros.

About Nephros Inc.

Nephros, Inc., headquartered in New York, is a medical device company developing and marketing products designed to improve the quality of life for the End-Stage Renal Disease (ESRD) patient, while addressing the critical financial and clinical needs of the care provider. ESRD is a disease state characterized by the irreversible loss of kidney function. Nephros believes that its products, particularly its Mid-Dilution Hemodiafiltration therapy, are designed to remove a range of harmful substances more effectively, and more cost-effectively, than existing ESRD treatment methods; particularly with respect to substances known collectively as "middle molecules," due to their molecular weight, that have been found to contribute to such conditions as dialysis related amyloidosis, carpal tunnel syndrome, degenerative bone disease and ultimately, to mortality in the ESRD patient.

Nephros also markets a line of water filtration products, the Dual Stage Ultrafilter (DSU). The Company’s patented dual stage cold sterilization ultrafilter has the capability to filter out bacteria and, due to its exceptional filtration levels, filter out many viruses and parasites. The DSU proprietary design provides dual stage filtration which virtually eliminates the risk of filtration failure. The Company considers the DSU a significant breakthrough in providing affordable and reliable water filtration. The DSU is based on Nephros’ proprietary water filtration technology originally designed for medical use in its H2H machine, and is a complimentary product line to the Company’s main focus, the End Stage Renal Disease therapy business.

For more information on Nephros please visit the Company’s website, www.nephros.com.

Forward Looking Statements

This news release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such statements may include statements regarding the efficacy and intended use of Nephros’s technologies, the timelines for bringing such products to market and the availability of funding sources for continued development of such products and other statements that are not historical facts, including statements which may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. For such statements, Nephros claims the protection of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the control of Nephros. Actual results may differ materially from the expectations contained in the forward-looking statements. Factors that may cause such differences include the risks that: (i) products, including the DSU technology, that appeared promising to Nephros in research or clinical trials may not demonstrate anticipated efficacy, safety or cost savings in subsequent pre-clinical or clinical trials; (ii) Nephros may not obtain appropriate or necessary governmental approvals to achieve its business plan or effectively market its products; (iii) product orders may be cancelled, patients or customers currently using Nephros’s products may cease to do so and patients or customers expected to begin using Nephros’s products may not do so; (iv) Nephros’s technology and products, including DSU technology, may not be accepted in current or future target markets, which could lead to the failure to achieve market penetration of Nephros’s products; (v) Nephros may not be able to sell its ESRD or water filtration products at competitive prices or profitably; (vi) Nephros may not be able to secure or enforce adequate legal protection, including patent protection, for its products; (vii) Nephros’ water filtration device and technology, including its ability to remove a broad range of bacteria, viral agents and toxic substances, may not achieve expected reliability, performance and endurance standards; (viii) Nephros’ water filtration technology may not achieve anticipated market acceptance, including among hospitals, or that such technology may not be suitable for other commercial, industrial or retail opportunities; and (ix) Nephros may be unsuccessful in devising a practicable plan of action to timely regain compliance with the AMEX listing standards. More detailed information about Nephros and the risk factors that may affect the realization of forward-looking statements is set forth in Nephros’s filings with the Securities and Exchange Commission, including Nephros’s Annual Report on Form 10-KSB filed with the SEC for the fiscal year ended December 31, 2005 and its Quarterly Report on Form 10-QSB filed with the SEC for the fiscal quarter ended June 30, 2006. Investors and security holders are urged to read those documents free of charge on the SEC’s web site at www.sec.gov. Nephros does not undertake to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

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