The aim is to study the assessment of the flow and convective heat transfer of laminar developing flow of Al2O3–water nanofluid inside a vertical tube. A finite volume method procedure on a structured grid was used to solve the governing partial differential equations. The adopted model (Buongiorno model) assumes that the nanofluid is a mixture of a base fluid and nanoparticles, with the relative motion caused by Brownian motion and thermophoretic diffusion. The results showed the distribution of nanoparticles remained almost uniform except in a region near the hot wall where nanoparticles volume fraction were reduced as a result of thermophoresis. The simulation results also indicated there is an optimal volume fraction about 1–2% of the nanoparticles at each Reynolds number for which the maximum performance evaluation criteria can be obtained. The difference between Nusselt number and nondimensional pressure drop calculated based on two phase model and the one calculated based on single phase model was less than 5% at all nanoparticles volume fractions and can be neglected. In natural convection, for 4% of nanoparticles volume fraction, in Gr = 10 more than 15% enhancement of Nusselt number was achieved but in Gr = 300 it was less than 1%.