At low ambient temperature, air-source heat pump water heater suffers from decrease of both heating capacity and coefficient of performance, and increase in compressor's pressure ratio and discharge temperature. A cascade air-source heat pump water heater with phase change material (PCM) for thermal storage application was designed to ensure the reliable operation under various weather conditions and enhance the system performance at low ambient temperature. Dynamic experiments were carried out under various operating conditions in accordance with China National Standard GB/T23137-2008. Transient operating characteristics were adopted to analyze the performance of cascade heat pump system. Dynamic performance of the heat pump water heater in single stage mode and cascade mode was compared and discussed. The heating COP values in single stage mode ranged from 1.5 to 3.05, while in cascade mode, the heating COP values ranged from 1.74 to 2.55. Based on the transient heating COP values, critical switching curve from single stage mode to cascade mode was founded for the code of the system controller. Furthermore, energy performance between water tanks with and without PCM was compared to clarify the contribution of PCM. (C) 2011 Elsevier Ltd. All rights reserved.