Heat exchangers are widely used in the process engineering such as the chemical industries, the petroleum industries, and the HVAC applications etc. An optimally designed heat exchanger cannot only help the optimization of the equipment size but also the reduction of the power consumption. In this paper, a new optimization approach called algorithms of changes (AOC) is proposed for design and optimization of the shell-tube heat exchanger. This new optimization technique is developed based on the concept of the book of changes (I Ching) which is one of the oldest Chinese classic texts. In AOC, the hexagram operations in I Ching are generalized to binary string case and an iterative process, which imitates the I Ching inference, is defined. Before applying the AOC to the heat exchanger design problem, the new optimization method is examined by the benchmark optimization problems such as the global optimization test functions and the travelling salesman problem (TSP). Based on the TSP results, the AOC is shown to be superior to the genetic algorithms (GA). The AOC is then used in the optimal design of heat exchanger. The shell inside diameter, tube outside diameter, and baffles spacing are treated as the design (or optimized) variables. The cost of the heat exchanger is arranged as the objective function. For the heat exchanger design problem, the results show that the AOC is comparable to the GA method. Both methods can find the optimal solution in a short period of time. © Mechanical Engineering Society and Springer-Verlag Berlin Heidelberg 2012.