We describe a robust system for laser-driven narrowband terahertz generation with high conversion efficiency in periodically poled Lithium Niobate (PPLN). In the multi-stage terahertz generation system, the pump pulse is recycled after each PPLN stage for further terahertz generation. By out-coupling the terahertz radiation generated in each stage, extra absorption is circumvented and effective interaction length is increased. The separation of the terahertz and optical pulses at each stage is accomplished by an appropriately designed out-coupler. To evaluate the proposed architecture, the governing 2-D coupled wave equations in a cylindrically symmetric geometry are numerically solved using the finite difference method. Compared to the 1-D calculation which cannot capture the self-focusing and diffraction effects, our 2-D numerical method captures the effects of difference frequency generation, self-phase modulation, self-focusing, beam diffraction, dispersion and terahertz absorption. We found that the terahertz generation efficiency can be greatly enhanced by compensating the dispersion of the pump pulse after each stage. With a two-stage system, we predict the generation of a 17.6 mJ terahertz pulse with total conversion efficiency η total = 1.6% at 0.3 THz using a 1.1 J pump laser with a two-line spectrum centered at 1 µm. The generation efficiency of each stage is above 0.8% with the out-coupling efficiencies above 93.0%.