This report explores the development of modular education and its application in the Dutch Open University. The origins of modular education are examined from the first applications in American higher education and the development of electives and the credit system to the role of modular instruction as the basis of higher education curriculum. Advantages of modular instruction include more choice and self-pacing for students; more variety and flexibility for teachers and staff; and increased adaptability of instructional materials. Disadvantages include greater self-discipline and self-motivation required for students, increased preparation time and lack of concrete rewards for teachers and staff, and greater administrative resources needed to track students and operate multiple modules. Changes in educational practices in the Dutch speaking world are reviewed, comparing traditional to modular approaches. The modular education program at the Dutch Open University, is described, including three modular course models (study unit model, the textbook-workbook model, and the essay/thesis model) with the advantages and disadvantages of each one outlined. Finally, the paper looks at the importance of prior knowledge, suggesting that in a modular education environment, according to the changing ideas in today's society on personal development, students will request a kind of instruction more fully in accordance with and appropriate to their personal characteristics and their prior knowledge state resulting in a more efficient and effective education for the learner. There is also the opportunity for students to skip a module or to work through it more quickly on the basis of prior knowledge. (Contains 27 references.) (ND)