A water heater with enhanced thermal efficiency includes a heat exchange tank, a water tank that houses the heat exchange tank and shields and isolates the heat exchange tank with a surrounding curtain of water flowing therethrough, a burner, and a blower. The burners is connected to a combustible gas outlet opening of the blower and extends from a central base of the heat exchange tank up into the heat exchange tank to form a combustion chamber within an internal cavity of the heat exchange tank. A plurality of radially arranged flame tubes extends downward from a top corner of the internal cavity and is enclosed by the water flowing inside the water tank. The flame tubes are extended to communicate an exhaust gas discharge tube set circumferentially of and separated from the base for discharging gas. Water inlet and outlet are respectively provided to the water tank.