A heat pump 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. The intercooler is positioned to be in a path of air flow passing over an outdoor heat exchanger, and preferably upstream of the outdoor heat exchanger, in relation to this air flow. Benefits with regard to efficiency and capacity are achieved due to proposed system configuration in both heating and cooling modes of operation, while no additional circuitry or components are required to provide the intercooler function for the heat pump refrigerant system. This invention is particularly important for the CO2 heat pump refrigerant systems operating in the transcritical cycle.