The aim of this paper is to simulate the performance of an air source heat pump water heater using carbon dioxide (CO2) as a working fluid. The heat pump water heating system consists of a compressor, a gas cooler, an expansion device and an evaporator. The computer simulation model has been developed by using the heat transfer data and the thermodynamic properties Of CO2. The effects on the heat pump performance by the operating parameters such as the compressor rotational speed, the inlet water temperature at the gas cooler, the inlet air temperature at the evaporator and the mass flow rate ratio of water to refrigerant were presented. For rated capacities of a 4 kW compressor with a 10 kW gas cooler and a 6 kW evaporator, the coefficient of performance is found to be between 2.0 and 3.0. The mass flow rate ratio of water and CO2 between 1.2 and 2.2 is the most suitable value for generating hot water temperature above 60C at 15-25C ambient air temperature. Copyright (c) 2007 John Wiley & Sons, Ltd.