Conventional network structure modifications for retrofitting heat exchanger networks (HENs) usually require a large network superstructure, which might lead to very large scale retrofit models, and thus increases the computational difficulties of optimization, especially for industrial applications. This paper presents a novel optimization approach of retrofitting HENs for both small scale and industrial scale problems. To overcome the drawback of the existing retrofit research, a simple but efficient method is proposed to determine the network retrofit superstructure based on the concept of pinching match. Then two optimization stages (network structure optimization and investment optimization) are solved with the MILE based iteration method that has been developed. The proposed approach has many benefits for solving HEN retrofit problems. First, smaller size of retrofit superstructure is provided based on the pinching match analysis. Second, the MILE bused iteration method developed converts conventional a mixed integer non-linear programming (MINLP) to a mixed integer linear programming (MILE), and significantly reduce the computational difficulties of nonlinear programming associated with configurational changes or structural modifications for existing heat exchanging arrangements, which is upgraded based on the MILE based iterative method proposed by Pan et al. (2012a) for retrofitting HENs with heat transfer intensifications, as the earlier work was only applicable to the cases without network topology modification. In case studies, the new proposed approach is compared with the existing methods in two literature examples and one industrial problem, demonstrating that the new proposed approach is able to obtain better and more realistic solutions for HEN retrofitting considering the economic trade-offs between energy savings and investments. (C) 2013 Elsevier Ltd. All rights reserved.