Due to its renewable and nonpolluting nature, solar energy is often used in applications such as electricity generation, thermal heating, and chemical processing. The most cost-effective solar heaters are of the “flat-plate” type, but these suffer from relatively low efficiency and outlet temperatures. The present study theoretically investigates the feasibility of using a nonconcentrating direct absorption solar collector (DAC) and compares its performance with that of a typical flat-plate collector. Here a nanofluid—a mixture of water and aluminum nanoparticles—is used as the absorbing medium. A two-dimensional heat transfer analysis was developed in which direct sunlight was incident on a thin flowing film of nanofluid. The effects of absorption and scattering within the nanofluid were accounted for. In order to evaluate the temperature profile and intensity distribution within the nanofluid, the energy balance equation and heat transport equation were solved numerically. It was observed that the presence of nanoparticles increases the absorption of incident radiation by more than nine times over that of pure water. According to the results obtained from this study, under similar operating conditions, the efficiency of a DAC using nanofluid as the working fluid is found to be up to 10% higher (on an absolute basis) than that of a flat-plate collector. Generally a DAC using nanofluids as the working fluid performs better than a flat-plate collector, however, much better designed flat-plate collectors might be able to match or outperform a nanofluids based DAC under certain conditions.