A fireplace is designed for installation in an enclosure such as a house. It includes a firebox for confining the combustion region. Of course, it has an exhaust outlet. A heat-exchange system is in heat-transfer relationship with the firebox. An air supply feeds air from outside the enclosure. A circulation system conducts air through the heat-exchange system and in communication with the enclosure. A control arrangement governs the conveyance of air from the supply to both the firebox and the heat-exchange system. A thermostat system within the enclosure operates the control means in response to temperature changes. Outside air is utilized both to control the degree of combustion and in the operation of the circulation system that heats the enclosure. A hollow grate system enhances efficiency.