Abstract: A modulating furnace includes a first air flow path which directs supply air to one or more combustion burners and through a heat exchanger, and a second air flow path which directs supply air around the one or more burners and heat exchanger. When the firing rate of the burners is lowered, the amount of air to the burners is reduced by diverting a greater fraction of the supply air to the second air flow path. When the firing rate of the burners is raised, less supply air is diverted resulting in greater flow to the burners. The duct furnace achieves ideal combustion at high and low firing rates by maintaining an ideal balance between firing rates and air supplied to the burners.