It is probably a reaction with the heaters magnesium rod, creating magnesium sulfide. The heater is proably old enough that removing the rod, if the magnesium has not all fallen off and is lying in the bottome of the tank, will not change the heaters longevity too much. If there is nothing left except the wire core, then you may have to replace the heater to eliminate the odor, and possibly remove the rod from the new heater or buy a Duron State/Reliance which does not have the rod in it.: Recently we have experienced a change in the way our hot water smells. Until 3 weeks ago the water had no specific aromal. This water is derived from a well which was chemically treated and we also drained and flushed the hot water heater. Anyone have any ideas?