Abstract: A heat pump system for providing water heating and air conditioning, comprising one or more compressors for circulating a refrigerant in the system, a hot water tank having a heat exchanger for heating and storing the hot water, an outdoor heat exchanger and a fan for rejecting or extracting heat to or from the outdoor environment in air cooling, or water heating and/or air heating modes of operation respectively, an indoor heat exchanger with a fan for conditioning and supplying air to an indoor space. The system is particularly suitable in applications which require water heating and house cooling all year round. The system may also be adapted to other situations such as year-round water heating with seasonal air cooling, or year-round water heating with seasonal air cooling and heating, etc., and used for different applications, e.g., space heating and cooling simultaneously.