Abstract: A compact high efficient air heater providing improved comfort regulation. The air heater includes a cross-flow type heat exchanger formed from a plurality of stacked corrugated plates which define a plurality of alternating flue gas passages and air passages, and which include a plurality of modified air passages which provide increased air flow through the heat exchanger along the flue gas inlet side whereby increased heat transfer along the flue gas inlet side is accomplished. The air heater also includes a plurality of bypass channels which direct air flow across at least one surface of the combustion chamber to remove heat from the combustion chamber housing, to lower the temperature of the flue gases entering the heat exchanger, and to reduce the temperature gradient at the air outlet side of the heat exchanger.