The water gas shift reaction has been studied in tubular Pd‐based membranes: a thin walled dense tube and a composite Pd‐ceramic tube have been considered. A computer code based on a finite element model has been developed for modelling the membrane reactor. The model accounts for the reaction kinetic, the hydrogen diffusion through the porous ceramic support and permeation through the PdAg membrane and for the partial pressure gradients of hydrogen generated at the permeate side of the membrane when a flow of purge gas is introduced.The code has been used to assess the influence of temperature, lumen pressure, presence of wall effects and sweep gas mode on the reaction conversion and hydrogen yield of the membrane reactors. At 200 kPa of lumen pressure and counter‐current sweep mode, it was found that both reaction conversion and hydrogen yield increase with temperature: the dense and the composite membranes exhibit very close values of conversion (more than 99% at 400 °C) and hydrogen yield (96–97% at 400 °C). In co‐current mode, the highest values of both reaction conversion and hydrogen yield have been assessed at 350 °C, while it was demonstrated that the beneficial effects of increasing the lumen pressure up to 400 kPa are maximum at 300 °C. Copyright © 2009 Curtin University of Technology and John Wiley & Sons, Ltd.