Decarbonization of the residential sector utilizing hydrogen has become a promising technical option to combat global warming. Therefore, blending hydrogen into natural gas infrastructures thus providing low carbon fuels to residential appliances is being investigated in the world. To facilitate the upcoming energy transition in residential pipelines, testing of existing appliances performance while operating on natural gas/hydrogen mixtures need to be conducted. In this study, various methane/hydrogen blends were supplied to a tankless water heater to study on the hydrogen impact on the water heater CO/NOx emissions, efficiency, water condensation rate, etc. The hydrogen percentage in the fuel mixture varies from 0% up to 30 vol%. In future hydrogen blending efforts, it is of great interest for both gas utility companies and gas consumers to know the exact hydrogen percentage in the pipeline before or during combustion devices operation. Moreover, there are also concerns regarding hydrogen stratification and segregation after blending, due to the low density of hydrogen compared to the heavier hydrocarbons in natural gas infrastructures. Therefore, under this project, two in-line gas sensors were installed in the residential pipeline to monitor the hydrogen contents and other fuel properties in real time, synchronized with the tankless water heater testing. This project demonstrates the feasibility for existing natural gas appliances operating on hydrogen-enriched fuels, with the gas contents being monitored without time delay.