Residential space and water heating accounts for approximately 12% of California's and 15% of the United States, energy consumption. most Of the residential heating is by direct use of natural gas. combustion of natural gas is a contributor to the overall air pollution, especially CO and NO(subscript x) in the urban areas. Another efficient method for domestic water and space heating is use of electric heat pumps, the most popular category of which uses air as its heat source. Electric heat pumps do not emit air pollutants at the point of use, but use electric power, which is a major contributor to air pollution at its point of generation from fossil fuels. It is the specific objective of this report to evaluate and compare the energy efficiency and source air pollutants of natural gas heaters and electric heat pumps used for domestic heating. Effect of replacing natural gas heaters with electric heat pumps on air pollutant emissions due to domestic heating in two urban areas and in California as a whole has also been evaluated. The analysis shows that with the present state of technology, electric heat pumps have higher heating efficiencies than natural gas heaters. Considering the current electricity generation mix in the US, electric heat pumps produce two to four times more NO(subscript x), much less CO, and comparable amount of CO2 per unit of useful heating energy compared to natural gas heaters. With California mix, electric heat pumps produce comparable NO(subscript x) and much less CO and approximately 30% less CO2 per unit heat output. Replacement of natural gas heaters with electric heat pumps will slightly increase the overall NO(subscript x), and reduce CO and CO2 emissions in California. The effect of advanced technology power generation and heat pump heating has also been analyzed.