In tropical climate regions, drinking chill water plays a vital role in physiological thermoregulation, including perspiration. Conventional (vapor-compression) cycle refrigeration for water cooling has remarkably negative influence on the environment. Thermoelectric (TE) cooling device is an alternative that exhibits potentials to reduce the environmental impact. In this paper, a TE drinking water cooler integrated with heat pipe heatsink is proposed, with such a prototype built and tested therein. The water cooler consists of two TE modules attached to heat pipe heatsinks on their hot sides and copper plate and tube heatsink on their cold sides. The effects of electric current supplied to the TE modules, ambient temperature, air and water flow rates on the system’s performance are investigated. Moreover, an economic evaluation is implemented by analyzing its initial capital cost (ICC) per cooling capacity. A set of heat transfer models was developed to predict the cold water produced from the TE water cooler. The calculated results conformed with the experimental results, the absolute error is found to be 4.4%. Thus, this model can be used in the design, performance optimization and further application of TE water cooler. A comparison between prototype and the conventional water cooler indicates that the proposed system yields higher coefficient of performance (COP) despite a higher ICC.