An ice producing and dispensing machine for delivering ice on demand to a consumer with a housing containing an ice maker having a discharge outlet for discharging ice. An ice bin is disposed below the ice maker having an open top for receiving ice from the ice maker and a bottom opening for discharging ice therefrom; a vertical tube is connected with the bottom opening for receiving discharged ice with an auger in the tube for driving the ice vertically in the tube; and a receiving chute connected with the tube for conveying the ice to the ice delivery outlet either in a bag or as free ice cubes. Melted water and ice chips from the ice production are recycled and used to cool the water that is fed to the ice maker.