A gas-fired water heater including a tank (1) to contain water to be heated and a flue (9) extending axially through the tank (1). A burner (8) is located at the lower end of the flue (9) and has a smaller cross sectional area than the flue to provide an annular space between the burner (8) and the lower end of the flue (9). The burner (8) has at least one outlet port (26) that directs a flame pattern in proximate relation to the lower end of the flue (9). A locator assembly (62) supports the burner from the flue and positions the burner axially of the flue.