The potential and limits of in situ removal of water under dimethyl ether (DME) synthesis conditions in a fixed-bed membrane reactor were studied numerically. The motivation for in situ H2O removal during DME synthesis by means of hydrophilic membranes is to displace the water gas shift equilibrium to enhance conversion of CO2 into methanol to improve DME productivity. In CO-rich feeds, methanol yield/selectivity increases/decreases slowly with increasing H2O permeance because only small amounts of water are removed from the system. Methanol dehydration is not inhibited by water, and DME selectivity is not improved significantly with increasing H2O permeance. When CO is gradually replaced with CO2, with the increase of H2O membrane permeance and H2O removal, methanol yield and DME selectivity are favored and the fraction of unconverted methanol is reduced as the dehydration reaction is accelerated due to reduced kinetic inhibition by H2O.