Ownership Submission
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
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(Print or Type Responses)
1. Name and Address of Reporting Person *
VAN DYKE WILLIAM G
   2. Issuer Name and Ticker or Trading Symbol
GRACO INC [GGG] 		5. Relationship of Reporting Person(s) to Issuer
(Check all applicable)
__X__ Director _____ 10% Owner
_____ Officer (give title below) _____ Other (specify below)
(Last)
(First)
(Middle)
88 11TH AVENUE NE		 3. Date of Earliest Transaction (Month/Day/Year)
10/01/2006
(Street)

MINNEAPOLIS, MN 55413		 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               14,101.696 D  

Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
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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
Phantom Stock Units $ 0 (1) 10/01/2006   A   362.91     (1)   (1) Common Stock 362.91 $ 39.06 19,304.835 D  
Non-Qualified Stock Option (right to buy) $ 5.23               (2) 05/06/2007 Common Stock 7,593   7,593 D  
Non-Qualified Stock Option (right to buy) $ 9.35               (3) 05/04/2009 Common Stock 7,593   7,593 D  
Non-Qualified Stock Option (right to buy) $ 10.07               (3) 05/02/2010 Common Stock 7,593   7,593 D  
Non-Qualified Stock Option (right to buy) $ 10.31               (2) 05/05/2008 Common Stock 7,593   7,593 D  
Non-Qualified Stock Option (right to buy) $ 12.18               (3) 05/01/2011 Common Stock 5,625   5,625 D  
Non-Qualified Stock Option (right to buy) $ 19.13               (4) 05/07/2012 Common Stock 5,625   5,625 D  
Non-Qualified Stock Option (right to buy) $ 20.27               (4) 05/06/2013 Common Stock 3,750   3,750 D  
Non-Qualified Stock Option (right to buy) $ 29.48               (4) 04/23/2004 Common Stock 3,000   3,000 D  
Non-Qualified Stock Option (right to buy) $ 37.13 (4)               (4) 04/22/2015 Common Stock 3,600   3,600 D  
Non-Qualified Stock Option (right to buy) $ 48.95 (5)               (5) 04/21/2016 Common Stock 3,600   3,600 D  

Reporting Owners

Reporting Owner Name / Address Relationships
 Director  10% Owner  Officer  Other
VAN DYKE WILLIAM G
88 11TH AVENUE NE
MINNEAPOLIS, MN 55413		   X      

Signatures

 By: Kristen C. Nelson, attorney-in-fact For: William G. Van Dyke   10/03/2006
**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) The phantom stock units were accrued under the Amended and Restated Graco Inc. Stock Incentive Plan (2006) and are to be settled 100% in Graco common stock in a lump sum or installments upon reporting person's termination of service on the Board.
(2) Nonemployee director stock option granted pursuant to the Graco Inc. Nonemployee Director Stock Option Plan in transaction exempt under Rule 16b-3. The stock option becomes exercisable in four equal annual installments commencing one year after the date of the grant.
(3) Nonemployee director stock option granted pursuant to the Graco Inc. Stock Incentive Plan in transaction exempt under Rule 16b-3. The stock option becomes exercisable in four equal annual installments, commencing one year after the date of the grant.
(4) Nonemployee director stock option granted pursuant to the Graco Inc. Stock Incentive Plan in a transaction exempt under Rule 16b-3. The stock option becomes exercisable in four equal annual installments, commencing one year after the date of the grant.
(5) Nonemployee director stock option granted pursuant to the Amended and Restated Graco Inc. Stock Incentive Plan (2006) in a transaction exempt under Rule 16b-3. The stock option becomes exercisable in four equal annual installments, commencing one year after the date of the grant.

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