A system design method of thermoelectric cooler is developed in the present study. The design calculation utilizes the performance curve of the thermoelectric module that is determined experimentally. An automatic test apparatus was designed and built to illustrate the testing. The performance test results of the module are used to determine the physical properties and derive an empirical relation for the performance of thermoelectric module. These results are then used in the system analysis of a thermoelectric cooler using a thermal network model. The thermal resistance of heat sink is chosen as one of the key parameters in the design of a thermoelectric cooler. The system simulation shows that there exists a cheapest heat sink for the design of a thermoelectric cooler. It is also shown that the system simulation coincides with experimental data of a thermoelectric cooler using an air-cooled heat sink with thermal resistance 0.2515°C/W. An optimal design of thermoelectric cooler at the conditions of optimal COP is also studied. The optimal design can be made either on the basis of the maximum value of the optimal cooling capacity, or on the basis of the best heat sink technology available.