Abstract In this research work, optimization of heat exchange between borehole heat exchanger (BHE) and the ground soil for space cooling and heating applications, incorporating the optimum thermal effectiveness of BHE has been reported. Initially, Taguchi technique is employed to optimize the effectiveness of borehole heat exchanger. Later, the experimental data of 24 h are coupled with the theoretically optimized parameters to compute the optimum heat exchange during peak summer and peak winter seasons. In the Taguchi optimization approach, six control variables at three levels are employed and a standard, L27 (36) orthogonal array is selected for the analysis. Among the six control variables, thermal conductivity of the grouting material is observed to be the most influential parameter and tube radius of BHE as the least parameter in the optimized thermal effectiveness of the BHE. Both the experiments for space heating and cooling were conducted on a 17.5 kW cooling capacity ground source heat pump system (GSHP), connected with five parallelly connected double U-tube BHE and one single U-tube BHE. To compute the optimum heat transfer to/ from the BHE, time-dependent borehole temperature was incorporated to include the dynamic thermal load of the GSHP system. After incorporating the Taguchi-optimized thermal effectiveness in the experimental data, there is an enhancement of 30% to 48% of heat rejection into the ground during the summer season, whereas in the winter season, there is an enhancement of 35– 52% of heat extraction from the ground.