In the present study, application of catalytic membrane reactor as a novel approach for the flare gas recovery is proposed. A comprehensive two-dimensional non-isothermal model has been constructed to evaluate the performance of flare gas recovery process in the membrane reactor. The model is developed by taking into accounts the main chemical kinetics, heat and mass transfer phenomena and hydrogen permeation in the radial direction across a Pd–Ag membrane. The model predictions are validated based on different experimental results reported in literature. The impact of reactor operating conditions on the recovery process such as temperature and pressure, feed molar ratio and sweep gas ratio are investigated and discussed. The modeling results confirm that the flare gas conversion and hydrogen recovery improves with increasing the operating temperature, pressure and sweep ratio as a consequence of increasing the driving force for H2 permeation through membrane. The environmental consideration revealed that by application of catalytic membrane reactor for the flare gas recovery of Asalouyeh gas processing plant (Iran), not only the equivalent mass of greenhouse gases emission reduces from 2179 kg/s to 36 kg/s, but also, 12.7 kg/s pure hydrogen will be produced by flare gas recovery at 750 K, 5 bar, sweep ratio of 5 and feed molar ratio of 4.