A water heater. The water heater includes a water tank adapted to contain water to be heated, a combustion chamber positioned proximate the water tank, a combustor positioned in the combustion chamber and operable to create products of combustion, a passage extending upwardly from the combustion chamber and through the water tank, the passage having an upper portion comprising an inner tube and an outer tube and a lower portion comprising an inner tube and an outer tube, and a transition element positioned in the passage and configured to direct supply air from the outer tube of the upper portion to the inner tube of the lower portion and deliver hot products of combustion from the outer tube of the lower portion to the inner tube of the upper portion, the transition element maintaining separation of the supply air and the products of combustion.