Considering the large energy consumption of conventional water heaters in residential buildings, the performance of a new type of water heater has been characterized through conducting experiments and numerical modelling. The specific water heater investigated in this work benefits from heat absorption from the indoor air, denoted as the air source heat pump water heater (ASHPWH), and is located in the Archetype Sustainable Twin House B in Toronto. The experiments have been conducted under three different indoor conditions associated with temperature and humidity. The coefficient of performance (COP), which quantifies the ratio of heating capacity to the consumed power of ASHPWH, ranges between 1.5 and 5, depending on the indoor dry bulb and water inlet temperatures. A TRNSYS model of ASHPWH has been constructed based on the obtained experimental results and has subsequently been integrated with a TRNSYS model of the Archetype Sustainable House (ASH). The numerical results were verified with the experimental data. The model results suggests that after employing ASHPWH, the domestic hot water energy consumption reduces by 60.3% and 53.2% compared to the electric water heater in summer and winter respectively. Due to the energy absorption of ASHPWH from the indoor environment, the heating load of the ASH house increases while its cooling load decreases. Furthermore, the annual electricity consumption of the ASH house due to the required heating and cooling as well as the domestic hot water demand is reduced by 21.3%. Finally, as a consequence of employing ASHPWH, the energy cost and GHG emission were reduced respectively by 22% and 21.7%. By investigating the system in four other Canadian cities, it appears that Vancouver and Edmonton would have the maximum and minimum energy savings respectively.