I would go with the exterior wall. That way you have more options for furniture placement. The TV could be above the fireplace (if you like it) or on the wall surrounded by bookcases.

If it is on the exterior wall, you still will be able to see both the fireplace and the TV.

Is it a wood or gas fireplace?

Will you be putting a TV in the space?

Will use actually use a fireplace? I love them and they look great but if I didn't need one for heat I'd not have one. They dictate too much, like limiting space for other things, traffic patterns, what looks good today in a fireplace may be very dated shortly. Look at all the posts from people wanting to know what to do with their problem fireplaces. I'm sure they weren't problems at on time but that's what they became as they aged. Ours became a super highway for the entire population of squirrels and mice in the lower Rockies. We have the pounds and pounds of turds to prove it.
We replaced it with a wood burning stove.

This post was edited by rgps on Thu, Sep 18, 14 at 17:19

I agree. Fireplaces are overrated. They take up lots of space and look nice until they show their age. Styles do change and the more built ins you do, the harder it is to change styles. We had 2 fireplaces at our last home and never used the one in the living room (that made it next to impossible to put a TV where we would have like it.)
Our family room in the lower level dictated the use of a fireplace because it was much cooler downstairs, even in the spring and fall. We installed a decorative, but highly efficient gas stove. We used it a lot, but not the one in the living room.
We have one now in the corner of the house we bought last year and at least it doesn't cause us any grief with the layout or block our view out the window. We've turned it on once in the last year.
Perhaps a corner fireplace could work for you.
I highly suggest you get graph paper now and lay out your living room/kitchen area and cut out sofas, tables and so on and arrange them on your graph paper to see how they fit. Your room looks somewhat square like I had in my last house and it took me a while to figure out what worked best, due to all the open areas and fireplace wall with shelves. If you are definitely not doing a TV, it might be easier, but we liked to watch some TV from our kitchen/DR.

I suppose it depends on the number of windows and amount/orientation of light you want in the room. What is your view out the back? Would you prefer a larger expanse of window in that spot or be okay with the fireplace taking up most of that wall? Are you someone who likes to decorate a mantel and see/enjoy it (and perhaps a fire) from the kitchen? If you change its orientation, will you add any other windows along that far wall? If so, what is the view from those windows? These are some of the questions I might want to consider if I were trying to make this decision.

My dream fireplace is between the kitchen and FR~next house! Even though it may not be your dream, could it be a consideration? Move the double oven to the other side of the sink, extend the wall, and have it installed between the two rooms. The ideal situation would be to switch the breakfast room and kitchen area so it can be near the table. It creates coziness in both spaces!

OR, how about a corner? That's how I have mine situated which allows me to have the sofa on the diagonal across from it, breaking up FR/kitchen areas.

If you're building a 2 story home, option #1 might not be a consideration, or you'll have to work around a chimney.

If that's a patio out there, then maybe you can have an indoor fireplace and outdoor grill area....

This is going to be a gas fireplace. We will be putting TV in the room.

The view from present placement is to the backyard and the behind the fireplace currently is another room.

A lot to think about!