Air-conditioning systems are significant contributors to the global climate change problem. Refrigerant leaks during operation, maintenance, and improper disposal at the end of their useful life contribute to the ozone-depletion and global warming problem. In the present study, two novel concepts for residential and commercial heat pumps using microchannel evaporator and condenser were investigated: air-coupled and hydronically coupled systems. The thermodynamic simulation models for both air-coupled and hydronically coupled heat pumps in the cooling and heating modes were designed using Engineering Equation Solver software. Results show that the microchannel heat pump would provide heating and cooling in a package much smaller than conventional systems. Both air-coupled and hydronically coupled systems also result in significant reductions in refrigerant inventories compared to the round tube systems investigated in the present study. This concept is a new approach toward the design, fabrication and installation of heating and cooling equipment. The drastic reductions in size yield substantial first-cost savings. The lower refrigerant inventories will minimize CFC and HCFC releases to the atmosphere, thus alleviating the ozone-depletion and global warming problems.