Abstract: A furnace and method of operation are disclosed for the efficient, controlled combustion of a combustible material such as wood, coal, etc. The furnace includes a grate which grate permits a large amount of combustible material to be stacked within the grate and to be constantly compressed to insure efficient combustion. The furnace also includes a heat exchanger surrounding the grate, which heat exchanger is comprised of an intake jacket and an exhaust jacket disposed on opposite sidewalls of the furnace. The heat exchanger also includes a plurality of heat exchange tubes disposed above and behind the grate and connecting the jackets. Air is drawn into one of the jackets, is directed through the heat exchange tube where the air is heated, and is exhausted through the other jacket. A portion of the heat exchanger intake air is diverted through a perforated air delivery tube disposed adjacent to the grate to provide combustion air for the combustible material.