This paper reports the exergetic modeling and performance evaluation of a novel multi-functional solar assisted heat pump system. Appropriate exergy equations are derived for the considered system and its each component. A sample system is built and tested under the subtropical weather conditions in Hong Kong. Based on experimental data in the air conditioning and water heating mode, energy and exergy performance assessment is conducted. The investigation results show the greatest irreversibility occurs in the solar collector, followed by the evaporator, the compressor, the desuperheater, the condenser and the thermostatic expansion valve. The exergy efficiencies of the solar collector loop and the multi-functional air source heat pump unit are 10.48% and 13.4% respectively. The COP of the studied system reaches 2.89 which is 24.2% larger than that of the conventional air conditioner. In addition, the solar collector has the highest improvement potential value, followed by the evaporator, the compressor, the desuperheater and the condenser.