Abstract: The present invention relates to a geothermal water heater system, and methods of heating water for domestic uses utilizing geothermal energy. More specifically, the present invention provides a geothermal heat pump water heater system includes a hot water tank, a cold water tank and at least one water-to-water heat pump. As contemplated, the water-to-water heat pump includes one or more heat exchangers which control heat transfer from water drawn from an outside water source. The outside water source water is supplied to both the hot water tank and the cold water tanks whereupon heat exchangers which comprise a cold water side heat exchanger and a hot water side heat exchanger, allow water entering the cold water tank to be cooled and returned to the cold water tank while water entering the hot water tank is heated and returned to the hot water tank.