The purpose of this study is to provide a detailed safety analysis of overall system and components in terms of their ability to provide optimum output from the irradiation of TeO2 in the central thimble of the 3 MW TRIGA MARK II research reactor at Atomic Energy Research Establishment (AERE), Savar, Dhaka, Bangladesh. It identifies safety issues relevant to 131I radioisotope production and ensures that safety analysis and design are consistent. It evaluates threats developed within the facility during the irradiation process and ultimately ensures establishment of in-core safety limits and conditions at all stages of 131I production. In-core irradiation safety not only ensures the safe operation of the reactor but also strengthens the production of radioisotopes (RI). This study attempts to review and modify all safety related events and aspects relating to RI production. The three-dimensional continuous energy Monte Carlo code MCNP is used to develop a versatile and accurate full-core model of the TRIGA core. The cross-section library and fission product inventory are generated by using NJOY and ORIGEN computer codes. The methodology to evaluate heat generation and other relevant parameters necessary to provide enough information for thermal hydraulic analysis are discussed. The neutron flux distribution inside the dry and water filled central thimble is determined in order to locate the highest neutron flux trapping position. The thermal hydraulic and safety analysis are performed by elaborate numerical analysis as well as by using GENGTC computer code. A mock-up facility has also been developed to supplement and verify the theoretically predicted results. The total energy generated during irradiation of 50 gm TeO2 sample in dry condition is found to be 113.84 w of which 75% energy is due to neutron heating and rest of the amount is from gamma heating. Around 11.28 w of heat energy is also generated in the quartz vial. When the total generated-heat transfer is considered through conduction and radiation mechanisms, the calculated temperature of 50 g of TeO2 reaches at 970 °C. Considering simultaneous heat transfer mechanisms, (conduction, radiation and convection) the calculated maximum temperature of the 50 g of TeO2 powder comes down at 680 °C. It may be pointed out that very high amount of heat is generated during the irradiation of TeO2 at 3 MW reactor power in dry condition which is nearly the melting point of TeO2 and may be termed as unsafe mode of irradiation.