Free standard shipping on orders over $149.97
Explainer

How does a tankless water heater work?

How does a tankless hot water heater work? Turn on a hot tap and the unit springs to life in about a second. Here is what happens inside, step by step.

Updated November 5, 2026 · 4 min read · By Tankless Water Heater Shop Editorial Team · How we write guides

Key takeaways

  • A flow sensor detects water moving, the burner or elements switch on, and the heat exchanger heats water to your set temperature as it passes through.
  • Most units heat water to 98–140°F; 120°F is the usual recommendation for homes.
  • The unit modulates its power to keep the temperature steady as flow changes.

Tankless water heater basics

A tankless water heater, also called an on demand water heater or instantaneous water heater, heats water only when you need it. There is no tank storing hot water. Instead, cold water flows through a heat exchanger that is heated by a gas burner or electric elements, and comes out hot.

If you’ve wondered how do tankless water heaters work compared with a tank, the short answer is that they heat water as it passes through instead of storing it. Here’s the tankless water heater how it works sequence in detail.

How a gas tankless water heater works

  1. You open a hot tap. Water starts flowing into the unit.
  2. A flow sensor detects the flow. Once it passes the minimum activation rate, the control board starts the sequence.
  3. The fan starts to bring in combustion air and push exhaust out of the vent.
  4. The igniter lights the burner. There is no standing pilot.
  5. The heat exchanger heats the water. Hot combustion gases pass over copper or stainless tubes carrying the water.
  6. Thermistors measure temperature at the outlet, and the control board adjusts the gas valve (modulation) to keep the water at your setting.
  7. You close the tap. Flow stops, the burner shuts off, and the fan runs briefly to clear the exhaust.

Condensing models have a second heat exchanger that captures heat from the exhaust, cooling it enough to condense water vapor. That raises efficiency above 90% and produces acidic condensate that must be drained. Learn more in condensing vs non-condensing.

How an electric tankless water heater works

Electric models replace the burner with heating elements inside chambers that water flows through. When the flow sensor detects demand, the control board switches on the elements, often in stages, and adjusts power to hit the set temperature. There is no combustion, no vent and no fan. Electric units need a large electrical supply, which is why they are sized in kilowatts. Compare fuels in gas vs electric tankless water heaters.

Temperature rise and flow

Every tankless unit has a fixed maximum heating power. The colder the incoming water, the more of that power is needed per gallon, so the unit can deliver fewer gallons per minute. That is why sizing depends on your temperature rise. Our sizing guide explains it with charts.

Tankless water heater temperature setting

What temperature should a tankless water heater be set at? For most homes, 120°F is the recommended setting. It is hot enough for showers and dishwashers and low enough to reduce scald risk. Some households set 110°F to reduce energy use further. Unlike a tank, a tankless unit doesn’t need a high setting to "store" extra hot water.

Why hot water doesn’t arrive instantly

Even an "instant" water heater can’t speed up the water already sitting in your pipes. The cold water between the heater and the faucet has to clear first. Add a recirculation pump or a point-of-use heater at distant fixtures to cut the wait.

Inside a tankless water heater

Component Job
Flow sensor Detects water flow and tells the unit to start
Burner or elements Produces heat
Heat exchanger Transfers heat to the water
Fan and venting (gas) Supplies combustion air and removes exhaust
Gas valve (gas) Modulates fuel to match demand
Thermistors Measure inlet and outlet temperature
Control board Runs the system, shows error codes
Inlet filter screen Catches debris entering the unit
Freeze protection heaters Prevent freezing in cold weather
Isolation valves Let you shut off water and flush the unit

When something goes wrong, the control board shows an error code. See our tankless water heater error codes guide.

A tankless water heater pump isn’t needed for normal operation, though a submersible pump for tankless water heater flushing is used during descaling. And while traditional tanks rely on anode rods (yes, gas water heaters have anode rods too), most tankless units do not.

See the specs

Compare flow rates, BTU and kW ratings across our tankless range.

Shop tankless water heaters

Frequently asked questions

How hot does a tankless water heater get?

Most residential models can be set between about 98°F and 140°F, with some commercial models going higher. Many manufacturers ship units at 120°F, which balances comfort, efficiency and scald safety.

Do tankless water heaters have a pilot light?

Modern gas tankless water heaters do not have a standing pilot light. They use electronic ignition each time hot water is called for.

Do tankless water heaters have an anode rod?

Most do not, because there is no steel tank to protect from corrosion. Their heat exchangers are copper or stainless steel. Some hybrid or buffer-tank models are exceptions.

Do tankless water heaters work with low flow?

Each unit has a minimum activation flow, often 0.25–0.5 GPM. Below that, the burner won’t turn on. Very low-flow faucets may need adjusting or a unit with a lower activation threshold.

Do tankless water heaters need a pump?

No. They use your home’s water pressure. An optional recirculation pump can be added to deliver hot water faster to far fixtures.

This guide is general information for U.S. homeowners, not professional advice. Gas, electrical and venting work must follow the manufacturer’s instructions and local codes, and in most areas requires a licensed plumber, electrician or gas fitter and a permit. Specifications and prices change; always confirm details on the product page and in the installation manual.