In the present paper, the performance of a shell and tube heat exchanger in which its cold working fluid is water and its hot working fluid is flue gases from natural gas-fueled internal combustion engine with working power of 15.4 kW was investigated. At first, with changing temperature and flow rate of inlet water, the performance of heat exchanger in both condensation and non-condensation situations was experimentally studied in the laboratory in order to have a criterion for validation of the simulations results in future. By comparing different simulation models in Aspen B-JAC software, the least error simulation model was chosen to do the other costly and impossible analyzes numerically in the laboratory environment. The study of the effect of the tube’s inner diameter on the heat exchanger’s performance in condensation situation showed 5.4% increase in the heat transfer while inner diameter decreases from 7 to 6 mm. The separation of the different heat transfer stages showed 26.4% of the latent heat transfer in the maximum discharge experiments for the inner diameter of 6 mm. Finally, the engine/heat exchanger set was assessed as micro combined heat and power and assumed that the heat exchanger is used for providing hot water for a 4-person family house in Tehran and the combustion engine is used for generating electrical power. This set was able to provide hot water during 9 warm months of a year by 1-hour work per day with 29% decrease of fuel consumption in comparison with traditional burners and at the same time, this set provides almost twice the electrical power requirements.