Renewable energy sources have a considerable potential to contribute to sustainable development and have the potential to reduce the reliance on fossil fuels. Direct-Expansion Water Source Heat Pump (DX-WSHP) could be used in air conditioning applications as an energy-efficient environmental-friendly system. In this study, DX-WSHP potential for air conditioning of a multi-level residential building was numerically examined. A closed-loop of copper pipes filled with R134a, as a refrigerant, was immersed in an underground water tank that is used as a heat sink/source. Cooling/Heating loads of the residential unit under three different climate conditions were estimated at different floor levels. The proposed system takes advantage of a higher heat transfer rate in water and better thermal performance when compared with traditional Air Source Heat Pumps (ASHP). A mathematical model was built to examine the performance of the system using the Engineering Equations Solver (EES) software. Results have shown that the DX-WSHP has outperformed the ASHP at a lower (higher) condensing (evaporating) temperature in the cooling (heating) mode with higher values of COP varies from 30% to 118%. Furthermore, there was a significant reduction in economic and environmental impacts, CO2 emissions, and electrical energy consumption of the DX-WSHP system for the three different climate conditions. The reduction in CO2 emissions varied from 8% to 40%. Additional advantages of the proposed system were found: energy-saving and overcoming the problems concerning heat rejection to the surrounding air and the outdoor fan noise.