This paper presents a new scheme of an inverter air cooling heat pump system with domestic hot water. A water reheater is placed between the compressor outlet and the four way valve inlet to utilize the sensible heat of the superheated gas exhausted from the compressor, and a water preheater is placed between the condenser and the throttling device to use the sensible heat of the subcooled liquid flowing out of the condenser. With these two parts of heat, the domestic hot water can be heated to a temperature high enough for domestic use. In order to maintain the system efficiency in the period of part load, an inverter compressor is adopted as the substitute for the constant speed one used in the conventional heat pump system. A hot water storage tank with a circulation pump is placed in the system to reduce the peak load of the system. Compared with the traditional system, this new design is able to reduce energy consumption by 31.1% and decrease thermal pollution to the environment. (C) 2003 Elsevier Ltd. All rights reserved.