Thermal energy storage (TES) will play a vital role in the transition to renewable and non-traditional residential heating. The thermal output of biomass/wood, solar (thermal and PV), and geothermal heating systems, for example, can differ dramatically from a home's hourly heat demand, and thus benefit significantly from thermal storage. Traditional hot-water systems require either two separate tanks, which doubles the storage footprint and cost, or a single thermo-cline tank in which hot water resides in the upper region and cold water below. This design however has several short comings which limit the extent of its use. This study introduces the smart thermal separator (STS). The idea is to incorporate a movable, insulated, rigid disk (STS) inside a water storage tank to physically separate the hot- and cold-water regions. The vertical location of the disk between the hot- and cold-water regions is actively maintained using temperature sensors, a gyroscope, a pressure transducer and adjustable buoyancy control. The technical scope of the project includes a combined numerical and experimental development of a working prototype. A 190-liter or 50-gallon prototype is modeled and tested to assess the heat transfer and fluid flow in the system. This paper also demonstrates sizing of the STS for integration with a Biomass/Woodstove Powered Absorption Heat Pump System.