Growing interest in small-scale, portable energy devices has necessitated the development of micro-scale fuel processing systems. Steam reforming of methane coupled with methane catalytic combustion in catalytic microreactors for hydrogen production was studied, using a two-dimensional computational fluid dynamics (CFD) model with detailed chemistry and transport. The effect of channel height, inlet steam-to-carbon ratio, wall thermal conductivity, catalyst, and flow rate were explored to provide guidelines for optimal design. Operating diagrams were constructed, and different operating lines were mapped out. It was shown that stable and efficient reactor operation is feasible at millisecond contact times with high conversion, but very careful design is crucial in achieving this. The steam reforming process is kinetically-controlled, whereas the catalytic combustion process is mixed kinetically/transport-controlled. For system design, the dimensions of the combustion channel must be picked to minimize transfer limitations. Operation at lower inlet steam-to-carbon ratio increases the power output at lower temperatures. The construction materials depend on the overall system optimization. Low-conductivity materials allow higher conversions and power outputs at the expense of hot spots, and moderate-conductivity materials make a good compromise between conversion and temperature. Furthermore, a performance comparison of rhodium and nickel suggested that it is vital to select the reforming catalyst. Finally, a simple operation strategy was proposed for obtaining maximum thermal efficiency, ensuring high conversions and reasonable wall isothermicity.