Abstract: A two-stage electric water heater which utilizes a centrally located, vertically-oriented flue pipe and multiple heating elements extending through selected lengths of copper tubing positioned in the flue pipe to heat the water surrounding the flue pipe. In a preferred embodiment a two-stage thermostat operates to selectively energize less than the total number of heating elements at a high energy level in order to raise the water temperature quickly from room temperature to a desired level. A single-stage thermostat may then be used to maintain the water at this temperature during normal operation. In another preferred embodiment the copper tubes through which the heating elements extend are dimpled or crimped into contact with the heating elements to increase heat transfer.