To produce hydrogen with a low CO concentration, steam methane reforming (SMR) was conducted in a Pd membrane reactor containing a methanation catalyst on the permeation side. Pd membranes were prepared by electroless plating (ELP) on porous stainless-steel and Inconel supports to achieve methanation. Compared with stainless-steel, Inconel support reduced the CO concentration by methanation. However, the membranes prepared by one-step ELP exhibited low selectivity and high CO concentrations, which was not suitable for use in low-temperature proton-exchange membrane fuel cells (LT-PEMFCs). To increase the hydrogen selectivity, a two-step vacuum-assisted ELP (VA–ELP) method was established. Hydrogen selectivity was increased by ~5 times (from 70 to 335) with this method, and hydrogen could be produced with a CO concentration of 200 ppm. However, for use in LT-PEMFCs, the CO concentration in the fuel stream is required to be below 10 ppm to prevent anode poisoning. Therefore, to further reduce the CO concentration, Ni/Al2O3, a methanation catalyst, was introduced on the permeation side of the Pd membrane reactor. SMR tests were conducted at 723 K, membrane pressure difference of 507 kPa, and gas hourly space velocity of 1200 h−1. The permeate stream produced under these conditions contained 4 ppm of CO with 97.7% H2, which is suitable for use in LT-PEMFCs.