A conventional heat pump exhibits performance degradation even though larger heating capacity is needed as the outdoor temperature declines. As a way to prevent the performance degradation, a heat pump with an inverter-driven two-stage rotary compressor and vapor injection (VI) cycle was investigated for an air-to-water heat pump (AWHP) system employing a flash tank. The volume ratio of two cylinder of a two-stage rotary compressor has significant effect on the performance of the AWHP so that it was experimentally investigated. Based on this result, a two-stage rotary compressor designed with an optimized volume ratio was manufactured and incorporated into the AWHP system. It was found that the VI AWHP system improved the heating capacity by 48% and the COP by 36% compared to those values for the conventional AWHP at water temperature of 60 degrees C and ambient temperature of -15 degrees C. This VI AWHP system can be used for cold climate applications. (C) 2012 Elsevier Ltd. All rights reserved.