Flow, combustion and heat transfer in a grate fired furnace burning wood with a heating power of 1 MW has been analysed numerically using the CFD software FLUENT 6.0. Such furnaces are used for example in hot-water boilers of real estate heating systems. The submodels of FLUENT are used for turbulence, for combustion of devolatilised fuel and for radiative heat transfer. The user-defined functions of FLUENT are used to incorporate a submodel for the description of drying, pyrolysis, combustion and gasification of wood on a grate. The grate submodel considers the interactions between the fuel bed and gas phase above the bed, and it predicts the temperature of the fuel bed and the temperature and the composition of the gas mixture released into the furnace from the bed. Subsequently, these are used to calculate the source terms for the flow modeling. The fuel bed model is employed together with the flow simulation. According to the results of the two simulation cases that are considered, minor changes to the construction of the present furnace could considerably reduce CO emissions. The predictions also show that the present fuel bed model is rather insensitive to the conditions of the gas phase above the bed but are more likely to be affected by the properties of the fuel bed.