In this paper a heat recovery system from oil heater as a water heater is proposed and analyzed. The potential of heat recovery is studied technically and economically. A model was built and experiments on it are discussed. Recovery of waste heat from the oil heater stack and its application in building is proven to be economically beneficial. The most part of this apparatus was a double-walled tanks and oil heater stack act as firebox for water heater. This tank with 200 liters volume was made of galvanized iron sheets and painted with black color for adsorption of solar radiation. The tank of water heater was filled with 12-15○C water. Sampling was performed at 8 in the morning to 8 at night during one week. The analysis results show that the heat recovery system is recognized as a well option for the examined residential building from both economic and environmental points of view. With the operation considering optimal economic benefits, cost is reduced by about 50%. With maximizing the environmental advantages, CO2 emissions are decreased.