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Heat pumps provide an efficient heating method; however they suffer from sever capacity and performance degradation at low ambient conditions. This has deterred market penetration in cold climates. There is a continuing effort to find an efficient air source cold climate heat pump that maintains acceptable capacity and performance at low ambient conditions. Systematic optimization techniques provide a reliable approach for the design of such systems. This paper presents a step-bystep approach for the design optimization of cold climate heat pumps. We first start by describing the optimization problem: objective function, constraints, and design space. Then we illustrate how to perform this design optimization using an open source publically available optimization toolbox. The response of the heat pump design was evaluated using a validated component based vapor compression model. This model was treated as a black box model within the optimization framework. Optimum designs for different system configurations are presented. These optimum results were further analyzed to understand the performance tradeoff and selection criteria. The paper ends with a discussion on the use of systematicoptimization for the cold climate heat pump design.