Abstract: A water heater for use in a fireplace includes a heat exchanger which sits in the fireplace behind the fire. The top portion of the heat exchanger is surrounded by but spaced from a removable hood-like heat trap which does not open directly into the chimney. The heat trap captures the hot air rising from the fire and confines it to flow rearwardly over the top of the heat exchanger and then downwardly along the rear side of the heat exchanger. The hot air then escapes under the lower edge of the skirt of the heat trap and is drawn up the chimney. In an alternative embodiment, the heat exchanger extends horizontally in a plenum under the fire. In other embodiments, an auxiliary fan is used to move the air through passages adjacent a heat exchanger.