Abstract: The present invention provides a water heater capable of exhausting flue gases from an interior space of a building to an exterior space and is adapted for installation through an upstanding wall. The water heater has an insulated tank with a water inlet and a water outlet together with a flue pipe opening at one end thereof beneath the tank upon a combustion chamber containing a fuel burner. The other end of the flue pipe opens at the top of the tank upon a flue gas collector and has a flue gas restricter for restricting the outward flow of flue gases from the flue pipe. The collector includes a collector box connected to the top of the water heater above and in alignment with the flue pipe, a blower and a low temperature flue gas exhaust line. The collector box has at least one air inlet for mixing air from the interior space of the building with flue gases exiting the flue pipe to inhibit condensation and reduce the temperature of the flue gases flowing through the exhaust line.