In this work a novel reactor configuration with hydrogen-permselective membrane is proposed for Fischer-Tropsch synthesis. In this configuration the synthesis gas is fed to the tube side and flows in co-current mode with reacting gas mixture that enters in the shell side of the reactor. in this way, the synthesis gas is heated by heat of reaction which is produced in the reaction side. Hydrogen can penetrate from the feed synthesis gas side into the reaction side as a result of a hydrogen partial pressure difference. The outlet synthesis gas from tube side is recycled to shells and the chemical reaction is initiated in catalytic bed. Therefore, the reacting gas in shell side is cooled simultaneously with passing gas in tube and saturated water in outer shell. in this study, the results of novel membrane reactor (MR) are compared with a conventional Fischer-Tropsch synthesis reactor (CR) at identical process conditions in terms of temperature, gasoline and CO(2) yields, H(2) and CO conversion as well as selectivity. This novel membrane Fischer-Tropsch reactor improves the selectivity of hydrogenation with hydrogen passing through membrane and increases production of high octane gasoline from synthesis gas on bifunctional Fe-HZSMS catalyst. The model was checked against conventional Fischer-Tropsch synthesis reactor (CR) in pilot plant of Research Institute of Petroleum Industry. Simulation results show 4.45% enhancement in the yield of gasoline production, 6.16% decrease in the undesired product formations, and a favorable temperature profile along the membrane Fischer-Tropsch reactor in comparison with conventional reactor. (C) 2009 International Association for Hydrogen Energy. Published by Elsevier Ltd. All rights reserved.