Recently, membrane reactor technology was used to produce high-quality biodiesel because of its advantage of simultaneous transesterification and separation. As the transesterification reaction involves two immiscible phases of methanol (MeOH) and oil (TG), a thorough investigation on the membrane reactor for biodiesel production with the consideration of chemical phase equilibrium (CPE) via modeling analysis, was conducted in this study. A mathematical model was developed based on the modified Maxwell-Stefan model with the incorporation of CPE. The formation of TG rich micelles dispersed in the continuous phase of MeOH was the most important hypothesis in the model development. The preliminary experiment results show that the permeate compositions from the membrane reactor were closely related to CPE of the system, which was highly depending on the MeOH to TG molar ratio. TG free permeate can only be obtained if the continuous phase of MeOH was free from TG and the TG rich micelles were retained by the membrane. The model verification further confirmed the formation of micelles dispersed in the continuous MeOH phase within the feed side of the membrane reactor and the model was able to predict the performance of the membrane reactor for biodiesel production at an acceptable accuracy. (C) 2012 American Institute of Chemical Engineers AIChE J, 59: 258-271, 2013