Drying system includes an integral baghouse dust collector positioned directly above the fluid bed drying zone. The configuration is designed to contain all of the fine particles entrained in the airstream and allow them to remain in the dryer for processing as product rather than collecting them remotely or accepting their loss as waste. The dryer design is intended to help food, chemical and other powder and bulk material processors specify fluid bed dryers or coolers for products less than 250 µm in size. Suited for closed-cycle drying products that require nitrogen purge or solvent recovery, the integral baghouse drying system is effective in drying and cooling products such as spices, grains, vitamins and sugar. In addition to processing fine particles, the integral baghouse dust collection system eliminates the need for remote dust collectors along with their associated drums, conveyors, ductwork and other equipment.