We present an investigation of the phenomenon of stress-induced polymer migration for dilute polymer solutions in the Taylor-Couette device, consisting of two infinitely long, concentric cylinders rotating at constant angular velocities. The underlying physical model is represented by the dilute limit of a two-fluid Hamiltonian system involving two components: one (the polymer) is viscoelastic and obeys the Oldroyd-B constitutive equation, and the other (the solvent) is viscous Newtonian. The two components are considered to be in thermal, but not mechanical equilibrium, interacting with each other through an isotropic drag coefficient tensor. This allows for stress-induced diffusion of polymer chains. The governing equations consist of the continuity and the momentum equations for the bulk velocity, the constitutive model for the polymer chain conformation tensor and the diffusion equation for the polymer concentration. The diffusion equation contains an extra source term, which is proportional to gradients in the polymer stress, so that polymer concentration gradients can develop even in the absence of externally imposed fluxes in the presence of stress inhomogeneities. The solution to the steady-state purely azimuthal flow is obtained first using a spectral collocation method and an adaptive mesh formulation to track the steep changes of the concentration in the flow domain. The calculations show the development of strong polymer migration towards the inner cylinder with increasing Deborah number (De) in agreement with experimental observations. The migration is enhanced for increasing values of the gap thickness resulting in concentration changes by several orders of magnitude in the area between the inner and outer cylinder walls. The extent of the migration also depends strongly on the ratio of the solvent to the polymer viscosity. In addition to a strongly inhomogeneous polymer concentration, significant deviations from the homogenous flow are also observed in the velocity profile. Next, results are reported from a linear stability analysis around the steady-state solution against axisymmetric disturbances corresponding to various wavenumbers in the axial direction. The calculations show that the steady-state solution remains stable up to moderate values of the Deborah number, explaining why some of the predicted stress-induced migration effects should be experimentally observable. The role of the Peclet number (Pe) on the stability of the system is elucidated.