Heat pump systems have been widely adopted in buildings for cooling and heating, due to their higher energy efficiency. Recently, the demand for hot water supply from the heat pump system has been increasing. To increase the water supply temperature with higher system efficiency and reliability, a heat pump water heater adopting cascade cycle was investigated in this study. The cascade heat pump water heater consisted of a low-stage cycle using R410A, and a high-stage cycle using R134a. A simulation program for the cascade heat pump water heater was developed, and verified by comparison with experimental data. The performance of the cascade heat pump water heater was optimized, by varying the compressor rotating speeds of the low- and high-stage cycles. At low ambient temperatures, the performance of the cascade cycle was compared with that of the single-stage cycle. The system efficiency of the cascade cycle was higher than that of the single-stage cycle, showing a lower compression ratio and compressor discharge temperature.