Hydrogen generation from natural gas for driving proton exchange membrane fuel cells in residential small-scale combined heat and power (CHP) applications is investigated by a series of computer simulations. Natural gas is converted into hydrogen either by the combined oxidation-steam reforming, i.e. indirect partial oxidation mechanism on Pt-Ni catalyst or by the direct, one-step partial oxidation mechanism on Pt monoliths. A water-gas shift converter and a catalytic selective carbon monoxide oxidation unit are used for reducing carbon monoxide levels to a value which the anode of proton exchange membrane fuel cell (PEMFC) can tolerate. Unconverted hydrocarbons and hydrogen rejected from the fuel cell are considered to be oxidized in a Pt catalyst packed afterburner in order to supply energy to the system. Reactor simulations based on available kinetic data together with energy integration calculations indicate direct partial oxidation to give higher hydrogen yields corresponding to increased electrical power outputs and elevated efficiencies. Indirect partial oxidation has the advantage of operating simplicity, since the direct route runs only at millisecond level residence times and high temperatures. In both mechanisms, water injection and energy integration are critical issues in adjusting product yields and in temperature control. The simulation outputs are compared and validated by the results based on the thermodynamics of the pertinent mechanism.