A refrigerant system is provided with at least two sequential stages of compression. An intercooler is positioned intermediate the two stages. The refrigerant flowing through the intercooler is cooled by a secondary fluid such as ambient air. A vapor/liquid injection function is also provided for the refrigerant system. The intercooler function and the vapor/liquid injection function are selectively activated on demand depending on environmental conditions and thermal load in a conditioned space. This invention is particularly important for the CO2 refrigerant systems operating in the transcritical cycle.