A fuel-fired commercial water heater has upper and lower communicated tank portions which are separated by a plenum forming a vertically intermediate portion of a dual pass condensing type heat exchanger. A lower portion of the heat exchanger is defined by a series of vertical flue tubes extending through the lower tank and intercommunicating the plenum with a combustion chamber disposed beneath the lower tank and having a fuel burner with a discharge portion communicated therewith. An upper portion of the heat exchanger is defined by a vertical flue pipe, disposed in the upper tank, that extends upwardly from the plenum and then coils downwardly around itself and horizontally exits the upper tank. During firing of water heater the burner flows flue gases sequentially through the lower tank flue tubes, the plenum, and the upper tank coiled flue pipe structure.