Abstract The industrial exhaust flue gas contains tremendous waste heat that cannot be efficiently recovered by conventional condensing heat exchanger. This paper proposes a novel full-open absorption heat pump for the total heat recovery of flue gas. The recovered heat is used for district heating. By applying direct-contact heat and mass transfer without solid transfer interfaces, the novel system can save considerable metallic tube or plate materials and therefore the initial investment can be reduced substantially. A prototype full-open absorption heat pump is developed and tested, achieving the COP (coefficient of performance) of 1.621 and the exit flue gas dew point of 36.2 °C at most. A detailed theoretical model in Eulerian–Lagrangian formulation is established, involving in conjugate heat and mass transfer and particle dynamics. The numerical simulation agrees well with the experiment results. On the basis of the validated model, three critical parameters, including excess air coefficient of the burner, moisture content of the objective flue gas and return water temperature of the district heating network, are selected to study their effects on system performances. As a controlled variable, especially, the excess air coefficient plays an important role by influencing the regeneration of the liquid absorbent in the generator. The full-open absorption heat pump outperforms the condensing heat exchanger by 19.7–178.1% in heat recovery capacity as the return water temperature increases from 40 to 55 °C.