A newly designed compact natural gas fuel processor, namely KIER prototype III, for 1-kW(e) class residential proton exchange membrane (PEM) fuel cell systems has been developed. The system satisfies the main prerequisites for viable application such as 80% thermal efficiency on the basis of lower heating value at full load as well as CO concentration at PrOx exit less than 10 ppm on a dry basis by integrating internal heat exchange network between heat sources, e.g. burner flame, flue gas and reformed gas from reformer exit, and sinks, e.g. water, feed gas and air. The total system volume including insulation is 13.5 Land also the response time at full load appeared to be less than 50 min. This work mainly describes the design strategies and the effects of independent parameters, e.g. SMR exit temperature and turn-down ratio, upon the response changes (carbon conversion and thermal efficiency). To develop an effective heat exchange network of a fuel processor, a commercial process simulation software package, Aspen Plus, has been used. Based on the simulation results of the conceptual design, a coaxial tubular fuel processor has been developed. Besides, the excellence of the thermally integrated system of the developed fuel processor is verified by comparing its actual operation data with the simulation results. Crown Copyright (C) 2014 Published by Elsevier B.V. All rights reserved.