This paper presents the effect of number of tubes, unequal baffle spacing and tube diameter on heat transfer and pressure drop characteristics of a typical shell and tube type heat exchanger. Upon geometrical optimization, the second phase of this research work aims at studying the influence of Al2O3 nanofluid of 0.5%, 0.75%, 1%, 1.25% and 1.5% concentrations by admitting water along the tubes and Al2O3 nanofluid along the shell side. The shell and tube heat exchangers of various geometrical configurations are modeled using SOLIDWORKS 2015. The heat transfer and fluid flow characteristics through the heat exchanger are obtained by solving the governing equations namely continuity, momentum and energy equations using ANSYS CFX 15 CFD code. Temperature, pressure contours and velocity streamlines along the mid-plane of the shell and tube heat exchanger are obtained for various geometrical configurations and for different volume concentration of nanofluid. The heat transfer coefficient and the pressure drop for various volume fraction concentrations of the nanofluid are plotted. The use of nanofluid resulted in increase of both the pressure drop and heat transfer coefficient. The heat transfer coefficient at 1.25% volume concentration of nanofluid is found to be the optimum value.