<PAGE>
 
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1998

                                        Registration No.____________________

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

                                   FORM S-8

                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
                          --------------------------

                           POWER INTEGRATIONS, INC.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)


          Delaware                                        94-3065014
---------------------------------           ------------------------------------
  (State or other jurisdiction              (I.R.S. employer identification no.)
of incorporation or organization)


                           477 North Mathilda Avenue
                              Sunnyvale, CA 94086
             ----------------------------------------------------
             (Address of principal executive offices)  (Zip code)


                           POWER INTEGRATIONS, INC.
                      1998 NONSTATUTORY STOCK OPTION PLAN
             ----------------------------------------------------
                           (Full title of the plan)


                               Robert G. Staples
                  Vice President, Finance and Administration,
                     Chief Financial Officer and Secretary
                           Power Integrations, Inc.
                           477 North Mathilda Avenue
                              Sunnyvale, CA 94086
             ----------------------------------------------------
                    (Name and address of agent for service)


Telephone number, including area code, of agent for service:  408/523-9200

This registration statement shall hereafter become effective in accordance with
Rule 462 promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
<PAGE>
 
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                         CALCULATION OF REGISTRATION FEE
----------------------------------------------------------------------------------------------------------------
                                                                PROPOSED
                 TITLE OF                                       MAXIMUM         PROPOSED
                SECURITIES                                      OFFERING        MAXIMUM        
                  TO BE                      AMOUNT TO BE      PRICE PER       AGGREGATE           AMOUNT OF    
               REGISTERED/1/                  REGISTERED        SHARE/2/      OFFERING PRICE    REGISTRATION FEE 
----------------------------------------------------------------------------------------------------------------
<S>                                         <C>              <C>            <C>                <C> 
1998 Nonstatutory Stock Option Plan
-----------------------------------

Common Stock                                   333,900         $ 9.6564       $3,224,271.96       $  896.35
Par Value $0.001                               166,100         $24.6875       $4,100,593.75       $1,139.97
                                                               --------       -------------       ---------
TOTAL                                          500,000                        $7,324,865.71       $2,036.32
                                                                              -------------       ---------
</TABLE>


-------------------------
   /1/ Includes options to acquire such Common Stock.

   /2/ The offering price is estimated pursuant to Rule 457 solely for purposes
of calculating the registration fee. As to the shares subject to outstanding but
unexercised options, the price is computed on the basis of the average exercise
price for the options outstanding under the 1998 Nonstatutory Stock Option Plan
(the "Plan"). As to the shares available for grant under the Plan, the price is
based upon the average of the high and low prices of the Common Stock on
December 28, 1998 as reported on the National Association of Securities Dealers
Automated Quotations System.
<PAGE>
 
                                    PART II

              INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
              --------------------------------------------------


Item 3.  Incorporation of Documents by Reference
------   ---------------------------------------

         Power Integrations, Inc. (the "Company") hereby incorporates by
reference in this registration statement the following documents:

         (a)   The Company's latest annual report on Form 10-K filed pursuant to
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), containing audited financial statements for the Company's
latest fiscal year ended December 31, 1997, as filed with the Securities and
Exchange Commission (the "Commission").

         (b)   All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the registrant document
referred to in (a) above.

         (c)   The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed on December 1, 1997 under the
Exchange Act, including any amendment or report filed for the purpose of
updating such description.

         All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment to this registration statement which indicates that all
securities offered hereby have been sold or which deregisters all securities
remaining unsold, shall be deemed to be incorporated by reference in this
registration statement and to be a part hereof from the date of filing of such
documents.

Item 4.  Description of Securities
------   -------------------------

         Inapplicable.

Item 5.  Interests of Named Experts and Counsel
------   --------------------------------------

         Inapplicable.

Item 6.  Indemnification of Directors and Officers
------   -----------------------------------------

         Delaware law authorizes corporations to eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach or alleged breach of the directors' "duty of care." While the
relevant statute does not change directors' duty of care, it enables
corporations to limit available relief to equitable remedies such as injunction
or rescission. The statute has no effect on directors' duty of loyalty, acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, illegal payment of dividends and approval of any transaction
from which a director derives an improper personal benefit.

     The Company has adopted provisions in its Certificate of Incorporation
which eliminate the personal liability of its directors to the Company and its
stockholders for monetary damages for breach or alleged breach of their duty of
care. The Bylaws of the Company provide for indemnification of its directors,
officers, employees and agents to the full extent permitted by the General
Corporation Law of
<PAGE>
 
the State of Delaware, the Company's state of incorporation, including those
circumstances in which indemnification would otherwise be discretionary under
Delaware Law. Section 145 of the General Corporation Law of the State of
Delaware provides for indemnification in terms sufficiently broad to indemnify
such individuals, under certain circumstances, for liabilities (including
reimbursement of expenses incurred) arising under the Securities Act.

Item 7.  Exemption From Registration Claimed
------   -----------------------------------

         Inapplicable.

Item 8.  Exhibits
-----    --------

         See Exhibit Index.

Item 9.  Undertakings
------   ------------

         (a)   Rule 415 Offering
               -----------------

               The undersigned registrant hereby undertakes:

               (1)    To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:

                      (i)    To include any prospectus required by Section
10(a)(3) of the Securities Act;

                      (ii)   To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement;

                      (iii)  To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;

provided, however, that paragraphs (a)(1)(i) and (a)(l)(ii) do not apply if the
-----------------                                                              
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the registration
statement.

               (2)    That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

               (3)    To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
<PAGE>
 
         (b)   Filing incorporating subsequent Exchange Act documents by
               --------------------------------------------------------- 
reference
---------

               The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

         (h)   Request for acceleration of effective date or filing of 
               -------------------------------------------------------
registration statement on Form S-8
----------------------------------

               Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
 
                                   SIGNATURE
                                   ---------

     Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sunnyvale, State of California, on December 28,
1998.

                                      POWER INTEGRATIONS, INC.


 

                                      By: /s/ Robert G. Staples
                                          -------------------------------------
                                             Robert G. Staples, Vice President, 
                                             Finance and Administration, Chief 
                                             Financial Officer and Secretary
<PAGE>
 
                               POWER OF ATTORNEY
                               -----------------

     The officers and directors of Power Integrations, Inc. whose signatures
appear below, hereby constitute and appoint Howard F. Earhart and Robert G.
Staples, and each of them, their true and lawful attorneys and agents, with full
power of substitution, each with power to act alone, to sign and execute on
behalf of the undersigned any amendment or amendments to this registration
statement on Form S-8, and each of the undersigned does hereby ratify and
confirm all that each of said attorney and agent, or their or his substitutes,
shall do or cause to be done by virtue hereof. Pursuant to the requirements of
the Securities Act, this registration statement has been signed by the following
persons in the capacities indicated on December 28, 1998.


<TABLE> 
<CAPTION> 

Signature                                   Title
-------------------------------------------------------------------------------------------
<S>                                        <C>

/s/ Howard F. Earhart
------------------------------------- 
Howard F. Earhart                           President, Chief Executive Officer and Director
                                            (Principal Executive Officer)

/s/ Robert G. Staples
-------------------------------------  
Robert G. Staples                           Vice President, Finance and Administration,
                                            Chief Financial Officer and Secretary
                                            (Principal Financial and Accounting Officer)

/s/ E. Floyd Kvamme
-------------------------------------  
E. Floyd Kvamme                             Director

/s/ Steven J. Sharp
-------------------------------------  
Steven J. Sharp                             Director


------------------------------------- 
William Davidow                             Director


-------------------------------------  
Edward C. Ross                              Director
</TABLE> 
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------

 


     4.1  Restated Certificate of Incorporation of the Company is incorporated
          by reference to Exhibit 3.2 to the Company's Registration Statement
          on Form S-1 filed with the Securities and Exchange Commission on
          September 11, 1997 (File No. 333-35421)

     4.2  Bylaws of the Company are incorporated by reference to Exhibit 3.4
          to the Company's Registration Statement on Form S-1 filed with the
          Securities and Exchange Commission on September 11, 1997 (File No.
          333-35421)

     5    Opinion re legality
 
    23.1  Consent of Counsel (included in Exhibit 5)
 
    23.2  Consent of Independent Public Accountants
 
    24    Power of Attorney (included in signature pages to this registration
          statement)
[{"type": "S-8", "sequence": "1", "description": "FORM S-8", "secsgml_size_bytes": 16202}]
{"company-data": {"conformed-name": "POWER INTEGRATIONS INC", "cik": "0000833640", "assigned-sic": "3674", "irs-number": "943065014", "state-of-incorporation": "CA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-69871", "film-number": "98777688"}, "business-address": {"street1": "477 NORTH MATHILDA AVENUE", "city": "SUNNYVALE", "state": "CA", "zip": "94086", "phone": "4085239210"}, "mail-address": {"street1": "477 NORTH MATHILDA AVENUE", "city": "SUNNYVALE", "state": "CA", "zip": "94086"}}
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1998

                                        Registration No.____________________

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

                                   FORM S-8

                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
                          --------------------------

                           POWER INTEGRATIONS, INC.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)

          Delaware                                        94-3065014
---------------------------------           ------------------------------------
  (State or other jurisdiction              (I.R.S. employer identification no.)
of incorporation or organization)

                           477 North Mathilda Avenue
                              Sunnyvale, CA 94086
             ----------------------------------------------------
             (Address of principal executive offices)  (Zip code)

                           POWER INTEGRATIONS, INC.
                      1998 NONSTATUTORY STOCK OPTION PLAN
             ----------------------------------------------------
                           (Full title of the plan)

                               Robert G. Staples
                  Vice President, Finance and Administration,
                     Chief Financial Officer and Secretary
                           Power Integrations, Inc.
                           477 North Mathilda Avenue
                              Sunnyvale, CA 94086
             ----------------------------------------------------
                    (Name and address of agent for service)

Telephone number, including area code, of agent for service:  408/523-9200

This registration statement shall hereafter become effective in accordance with
Rule 462 promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
----------------------------------------------------------------------------------------------------------------
                                         CALCULATION OF REGISTRATION FEE
----------------------------------------------------------------------------------------------------------------
                                                                PROPOSED
                 TITLE OF                                       MAXIMUM         PROPOSED
                SECURITIES                                      OFFERING        MAXIMUM        
                  TO BE                      AMOUNT TO BE      PRICE PER       AGGREGATE           AMOUNT OF    
               REGISTERED/1/                  REGISTERED        SHARE/2/      OFFERING PRICE    REGISTRATION FEE 
----------------------------------------------------------------------------------------------------------------
1998 Nonstatutory Stock Option Plan
-----------------------------------

Common Stock                                   333,900         $ 9.6564       $3,224,271.96       $  896.35
Par Value $0.001                               166,100         $24.6875       $4,100,593.75       $1,139.97
                                                               --------       -------------       ---------
TOTAL                                          500,000                        $7,324,865.71       $2,036.32
                                                                              -------------       ---------
-------------------------
   /1/ Includes options to acquire such Common Stock.

   /2/ The offering price is estimated pursuant to Rule 457 solely for purposes
of calculating the registration fee. As to the shares subject to outstanding but
unexercised options, the price is computed on the basis of the average exercise
price for the options outstanding under the 1998 Nonstatutory Stock Option Plan
(the "Plan"). As to the shares available for grant under the Plan, the price is
based upon the average of the high and low prices of the Common Stock on
December 28, 1998 as reported on the National Association of Securities Dealers
Automated Quotations System.
PART II

              INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
              --------------------------------------------------

Item 3.  Incorporation of Documents by Reference
------   ---------------------------------------

         Power Integrations, Inc. (the "Company") hereby incorporates by
reference in this registration statement the following documents:

         (a)   The Company's latest annual report on Form 10-K filed pursuant to
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), containing audited financial statements for the Company's
latest fiscal year ended December 31, 1997, as filed with the Securities and
Exchange Commission (the "Commission").

         (b)   All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the registrant document
referred to in (a) above.

         (c)   The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed on December 1, 1997 under the
Exchange Act, including any amendment or report filed for the purpose of
updating such description.

         All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment to this registration statement which indicates that all
securities offered hereby have been sold or which deregisters all securities
remaining unsold, shall be deemed to be incorporated by reference in this
registration statement and to be a part hereof from the date of filing of such
documents.

Item 4.  Description of Securities
------   -------------------------

         Inapplicable.

Item 5.  Interests of Named Experts and Counsel
------   --------------------------------------

         Inapplicable.

Item 6.  Indemnification of Directors and Officers
------   -----------------------------------------

         Delaware law authorizes corporations to eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach or alleged breach of the directors' "duty of care." While the
relevant statute does not change directors' duty of care, it enables
corporations to limit available relief to equitable remedies such as injunction
or rescission. The statute has no effect on directors' duty of loyalty, acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, illegal payment of dividends and approval of any transaction
from which a director derives an improper personal benefit.

     The Company has adopted provisions in its Certificate of Incorporation
which eliminate the personal liability of its directors to the Company and its
stockholders for monetary damages for breach or alleged breach of their duty of
care. The Bylaws of the Company provide for indemnification of its directors,
officers, employees and agents to the full extent permitted by the General
Corporation Law of
the State of Delaware, the Company's state of incorporation, including those
circumstances in which indemnification would otherwise be discretionary under
Delaware Law. Section 145 of the General Corporation Law of the State of
Delaware provides for indemnification in terms sufficiently broad to indemnify
such individuals, under certain circumstances, for liabilities (including
reimbursement of expenses incurred) arising under the Securities Act.

Item 7.  Exemption From Registration Claimed
------   -----------------------------------

         Inapplicable.

Item 8.  Exhibits
-----    --------

         See Exhibit Index.

Item 9.  Undertakings
------   ------------

         (a)   Rule 415 Offering
               -----------------

               The undersigned registrant hereby undertakes:

               (1)    To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:

                      (i)    To include any prospectus required by Section
10(a)(3) of the Securities Act;

                      (ii)   To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement;

                      (iii)  To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;

provided, however, that paragraphs (a)(1)(i) and (a)(l)(ii) do not apply if the
-----------------                                                              
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the registration
statement.

               (2)    That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

               (3)    To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b)   Filing incorporating subsequent Exchange Act documents by
               --------------------------------------------------------- 
reference
---------

               The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

         (h)   Request for acceleration of effective date or filing of 
               -------------------------------------------------------
registration statement on Form S-8
----------------------------------

               Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURE
                                   ---------

     Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sunnyvale, State of California, on December 28,
1998.

                                      POWER INTEGRATIONS, INC.

 

                                      By: /s/ Robert G. Staples
                                          -------------------------------------
                                             Robert G. Staples, Vice President, 
                                             Finance and Administration, Chief 
                                             Financial Officer and Secretary
POWER OF ATTORNEY
                               -----------------

     The officers and directors of Power Integrations, Inc. whose signatures
appear below, hereby constitute and appoint Howard F. Earhart and Robert G.
Staples, and each of them, their true and lawful attorneys and agents, with full
power of substitution, each with power to act alone, to sign and execute on
behalf of the undersigned any amendment or amendments to this registration
statement on Form S-8, and each of the undersigned does hereby ratify and
confirm all that each of said attorney and agent, or their or his substitutes,
shall do or cause to be done by virtue hereof. Pursuant to the requirements of
the Securities Act, this registration statement has been signed by the following
persons in the capacities indicated on December 28, 1998.
Signature                                   Title
-------------------------------------------------------------------------------------------
/s/ Howard F. Earhart
------------------------------------- 
Howard F. Earhart                           President, Chief Executive Officer and Director
                                            (Principal Executive Officer)

/s/ Robert G. Staples
-------------------------------------  
Robert G. Staples                           Vice President, Finance and Administration,
                                            Chief Financial Officer and Secretary
                                            (Principal Financial and Accounting Officer)

/s/ E. Floyd Kvamme
-------------------------------------  
E. Floyd Kvamme                             Director

/s/ Steven J. Sharp
-------------------------------------  
Steven J. Sharp                             Director

------------------------------------- 
William Davidow                             Director

-------------------------------------  
Edward C. Ross                              Director
EXHIBIT INDEX
                                 -------------

 

     4.1  Restated Certificate of Incorporation of the Company is incorporated
          by reference to Exhibit 3.2 to the Company's Registration Statement
          on Form S-1 filed with the Securities and Exchange Commission on
          September 11, 1997 (File No. 333-35421)

     4.2  Bylaws of the Company are incorporated by reference to Exhibit 3.4
          to the Company's Registration Statement on Form S-1 filed with the
          Securities and Exchange Commission on September 11, 1997 (File No.
          333-35421)

     5    Opinion re legality
 
    23.1  Consent of Counsel (included in Exhibit 5)
 
    23.2  Consent of Independent Public Accountants
 
    24    Power of Attorney (included in signature pages to this registration
          statement)