Abstract: This study presents a new systematic technique for design of heat recovery network with minimum area and exergy loss. This method uses payback period as the decision variable to decide the best hot and cold stream matches. Based on the payback period, the minimum heat exchanger networks area which yields the minimum exergy loss will be obtained. The proposed technique begins with the construction of segregated curves on a temperature versus heat load diagram for all process streams to give preliminary information of all possible stream matches. The next step is to set up decision stream match table which uses payback period as the decision variable for streams matching. The final step of the procedure involves optimization the heat exchanger loops and paths. Application of the approach on a case study shows that better results can be achieved in terms of the total cost, utility cost, heat exchanger networks area and exergy loss as compared to the results obtained using conventional Pinch Technique.