Working prototype of a transcritical CO2 heat pump system for simultaneous cooling and heating of water is designed and developed based on numerical simulation Studies. System behaviour and performance of the system have been studied experimentally for various operating parameters such as system pressure, water mass flow rate, water inlet temperature and expansion valve opening. Finally, the system simulation model predictions have been validated by the test data. Test results show the effect of water mass flow rate to be modest for both evaporator and gas cooler, whereas the effect of water temperature at the inlet to the gas cooler on system performance is significant. The expansion valve opening has a significant effect as well near the full valve closing condition (up to 20 degrees). Validation of the simulation model shows reasonably good agreement (a maximum deviation of 15%) with the test data exhibiting fairly similar trends. Copyright (C) 2008 John Wiley & Sons, Ltd.