Abstract: A heat pump water heater and method is disclosed. The heat pump water heater includes a stratified water tank configured to hold water of different temperatures therein and a heat exchange unit. The heat exchange unit includes a pump configured to remove water from a bottom of the stratified tank, a heat pump having a condenser configured to receive the water from the pump and supply heat to the water flowing through the condenser such that the condenser heats the water to a pre-determined temperature, and a resistance heater configured to receive the heated water from the condenser. The resistance heater supplies additional heat to the water if the pre-determined temperature of the water exiting the condenser does not equal or exceed a pre-determined set-point. The heated water from the resistance heater is supplied to a top of the stratified tank for use by a residence or utility.