A novel membrane reactor system equipped with a CO methanator was proposed for the efficient production of CO-free hydrogen by a simple and compact reactor unit without any additional purification of hydrogen. It is expected that a trace amount of CO in the permeate can be removed through the methanation at the sacrifice of a minimum amount of hydrogen. The effectiveness of this system was experimentally examined for the steam reforming of methane in the membrane reactor using a thin Pd/Ag membrane with a few defects and a Ru/Al2O3 catalyst for methanation. It was demonstrated that a highly concentrated and practically CO-free hydrogen could be successfully obtained with attaining the high methane conversion beyond the limit imposed by equilibrium, and the amount of hydrogen consumed by the CO and CO2 methanations was much lowered; that is, it was less than ca. 1% of hydrogen permeated through the membrane. Furthermore, the catalytic performance for methanation at relatively high temperature was investigated using a packed bed type reactor with a simulative permeate, because the loss of hydrogen due to the methanations can be more reduced by a catalyst with the ability for CO selective methanation in the presence of CO2. The experimental result that the selectivity toward CO methanation strongly depended on the metal catalyst and the support suggested the possibility of further improvement of the proposed system.