In this paper, a transcritical carbon dioxide heat pump system driven by solar-owered CO2 Rankine cycle is proposed for simultaneous heating and cooling applications. Based on the first and second laws of thermodynamics, a theoretical analysis on the performance characteristic is carried out for this solar-powered heat pump cycle using CO2 as working fluid. Further, the effects of the governing parameters on the performance such as coefficient of performance (COP) and the system exergy destruction rate are investigated numerically. With the simulation results, it is found that, the cooling COP for the transcritical CO2 heat pump syatem is somewhat above 0.3 and the heating COP is above 0.9. It is also concluded that, the performance of the combined transcritical CO2 heat pump system can be significantly improved based on the optimized governing parameters, such as solar radiation, solar collector efficient area, the heat transfer area and the inlet water temperature of heat exchange components, and the CO2 flow rate of two sub-cycles. Where, the cooling capacity, heating capacity, and exergy destruction rate are found to increase with solar radiation, but the COPs of combined system are decreased with it. Furthermore, in terms of improvement in COPs and reduction in system exergy destruction at the same time, it is more effective to employ a large heat transfer area of heat exchange components in the combined heat pump system. Copyright © 2012 John Wiley & Sons, Ltd.