Product quality of Fischer-Tropsch synthesis is improved by catalytic hydrocracking which converts heavy hydrocarbon fractions (wax) to commercially valuable fuels. The process is highly exothermic and requires strict temperature control; high temperatures cause overcracking to lower, commercially undesired hydrocarbons, whereas low temperatures reduce the conversions. Running hydrocracking in microchannel reactors is promising, since submillimeter dimensions lead to significant compaction that favors robust temperature control. This work investigates modeling and simulation of hydrocracking in a heat-exchange-integrated microchannel reactor involving parallel groups of square-shaped cooling and catalyst-coated reaction channels. Effects of material type and thickness of the wall separating the channels, and operating parameters (reactant and coolant feed temperatures and space velocity of the reactant stream) on reaction temperature and product distribution are investigated. Mole fractions of the products in the diesel cut (C-19-C-22) and jet cut (C-11-C-18) ranges are highly sensitive to operating parameters due to fast heat transport. The process suffers from overcooling and reduced conversions in reactors characterized by thicker walls with high thermal conductivities, whereas hot spots may exist in reactors characterized by thinner walls with low thermal conductivities. Temperature and product distributions in hydrocracking can be optimized within the pertinent operating window by careful configuration of the reactor.