Compared to the conventional solar-assisted heat pump (SAHP) water heating system, a relatively more compact direct-expansion solar assisted heat pump (DX-SAHP) has been introduced, in which the solar collector acts as an evaporator. Details of the analytical studies of a CO2 transcritical cycle on SAHP water heating system are presented in this study. A numerical model has been developed to optimize the system design and operating parameters. The simulation model can predict the performance of the system COP, collector efficiency and heat capacity. An experimental prototype using the evacuated tube U-pipe solar collector utilized to verify the simulation results. The results show that both the solar radiation and ambient temperature have a significant impact on the DX-SAHP system's thermal performance. Year round performance showed that, theoretically, the system could achieve on an average, COP of 2 - 3.2, collector efficiency of 40 - 62% and water temperature to be about 43° - 56°C.