The present work investigates enhancement of CO conversion in a palladium-silver membrane reactor for methanol synthesis. A novel reactor configuration with perm-selective Pd-Ag (23 wt.% Ag) wall to hydrogen has been proposed. The reacting material is flowing through the tube side while synthesis gas is flowing through the shell side in co-current mode. The perm-selective layer of palladium allows hydrogen in synthesis gas to penetrate to the reaction side. The impact of thickness of Pd-Ag layer, feed flow rate of reaction side, temperature and pressure of reaction side, pressure of shell side, the amount of carbon monoxide in feed (relative to total amount of CO and CO2), and stoichiometric number on the carbon monoxide conversion have been examined. The results demonstrate that membrane reactor can raise carbon monoxide conversion beyond equilibrium value. (C) 2004 Elsevier B.V. All rights reserved.