FORM 4 Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the Investment Company Act of 1940

OMB APPROVAL OMB Number: 3235-0287 Expires: January 31, 2005 Estimated average burden hours per response... 0.5

(Print or Type Responses)

1. Name and Address of Reporting Person * BROTZMAN RICHARD W   2. Issuer Name and Ticker or Trading Symbol NANOPHASE TECHNOLOGIES CORPORATION [NANX] 5. Relationship of Reporting Person(s) to Issuer (Check all applicable) _____ Director _____ 10% Owner __X__ Officer (give title below) _____ Other (specify below) VP - Research & Development (Last) (First) (Middle) 1319 MARQUETTE DRIVE 3. Date of Earliest Transaction (Month/Day/Year) 08/31/2006 (Street) ROMEOVILLE, IL 60446 4. If Amendment, Date Original Filed(Month/Day/Year) 6. Individual or Joint/Group Filing(Check Applicable Line) _X_ Form filed by One Reporting Person ___ Form filed by More than One Reporting Person (City) (State) (Zip) Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned

1.Title of Security (Instr. 3) 2. Transaction Date (Month/Day/Year) 2A. Deemed Execution Date, if any (Month/Day/Year) 3. Transaction Code (Instr. 8) 4. Securities Acquired (A) or Disposed of (D) (Instr. 3, 4 and 5) 5. Amount of Securities Beneficially Owned Following Reported Transaction(s) (Instr. 3 and 4) 6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4) 7. Nature of Indirect Beneficial Ownership (Instr. 4) Code V Amount (A) or (D) Price Common Stock 08/31/2006   M   4,435 A $ 3.886 4,435 D   Common Stock 08/31/2006   S   4,435 D $ 6.88 0 D   Common Stock               3,000 D

Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
	Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.		SEC 1474 (9-02)

Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned
(e.g., puts, calls, warrants, options, convertible securities)

1. Title of Derivative Security (Instr. 3)

2. Conversion or Exercise Price of Derivative Security

3. Transaction Date (Month/Day/Year)

3A. Deemed Execution Date, if any (Month/Day/Year)

4. Transaction Code (Instr. 8)

5. Number of Derivative Securities Acquired (A) or Disposed of (D) (Instr. 3, 4, and 5)

6. Date Exercisable and Expiration Date (Month/Day/Year)

7. Title and Amount of Underlying Securities (Instr. 3 and 4)

8. Price of Derivative Security (Instr. 5)

9. Number of Derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4)

10. Ownership Form of Derivative Security: Direct (D) or Indirect (I) (Instr. 4)

11. Nature of Indirect Beneficial Ownership (Instr. 4)

Code

V

(A)

(D)

Date Exercisable

Expiration Date

Title

Amount or Number of Shares

Common Stock (right to buy)

$ 3.886

08/31/2006

M

4,435

11/07/1997(1)

11/07/2006

Common Stock

4,435

$ 3.886

0

D

Common Stock (right to buy)

$ 3.8125

07/31/1999(2)

07/31/2008

Common Stock

40,600

40,600

D

Common Stock (right to buy)

$ 7.6875

05/24/2001(3)

05/24/2010

Common Stock

22,500

22,500

D

Common Stock (right to buy)

$ 10.875

01/26/2002(3)

01/26/2011

Common Stock

20,000

20,000

D

Common Stock (right to buy)

$ 7.0625

02/28/2002(3)

02/28/2011

Common Stock

20,000

20,000

D

Common Stock (right to buy)

$ 6.65

01/03/2003(3)

01/03/2012

Common Stock

20,000

20,000

D

Common Stock (right to buy)

$ 3.66

03/24/2004(3)

03/24/2013

Common Stock

20,000

20,000

D

Common Stock (right to buy)

$ 5.55

10/11/2005(3)

10/11/2014

Common Stock

11,000

11,000

D

Common Stock (right to buy)

$ 6.03

09/27/2006(3)

09/27/2015

Common Stock

10,000

10,000

D

Reporting Owners

Reporting Owner Name / Address	Relationships
	Director	10% Owner	Officer	Other
BROTZMAN RICHARD W 1319 MARQUETTE DRIVE ROMEOVILLE, IL 60446			VP - Research & Development

Signatures

Richard W. Brotzman, Jr.		09/01/2006
**Signature of Reporting Person		Date

Explanation of Responses:

*	If the form is filed by more than one reporting person, see Instruction 4(b)(v).
**	Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
(1)	Subject to certain restrictions, 51,485 of this original option grant of 69,480 shares vested in five equal annual installments beginning on 11/07/1997, with the remainder vesting on 11/07/2004.
(2)	Subject to certain restrictions, beginning on this date, options vest in five equal installments.
(3)	Subject to certain restrictions, beginning on this date, options vest in three equal annual installments.
Remarks: The sales reported in this Form 4 were effected pursuant to a rule 10b5-1 plan adopted by Dr. Brotzman on January 3, 2005.  The class of stock options exercised in this transaction were set to expire on 11/7/2006.

Note: File three copies of this Form, one of which must be manually signed. If space is insufficient, see Instruction 6 for procedure.

Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB number.