The effect of the relative rates of reaction and H-2 permeation through palladium-silver (Pd-Ag) membranes upon the performance of a catalytic membrane reactor (CMR) for methylcyclohexane dehydrogenation has been investigated. Mathematical models have been used to identify the conditions at which a membrane reactor gives yields of toluene (TOL) and H-2 significantly in excess of equilibrium values at throughputs of industrial interest. The simulation shows that a catalyst with no product TOL inhibition performs exceptionally well in a CMR, giving conversions considerably above the equilibrium values at favorable operating conditions. Using a membrane unit between two conventional packed-bed reactors to separate the H-2 ex-situ gives significant improvement in performance over the shell-and-tube type CMR, resulting in conversions substantially higher than equilibrium at 633 K, 1.5 MPa, and liquid hourly space velocities of 3-10 volume feed/h/catalyst volume.