A fixed bed membrane reactor is disclosed. The reactor has a housing including an inlet for receiving reactants and an outlet for discharging retentate streams of reaction products. The inlet and outlet are in fluid communication with a reaction zone in which the reactants may passe downstream from the inlet to the outlet with the reactants reacting to produce reaction products including water. The reactor further includes a membrane assembly disposed in fluid communication with the reaction zone. The membrane assembly includes at least one porous support with a water permselective membrane affixed thereto. The membrane allows water produced in the reaction zone to be selectively removed from the reaction zone as a permeate stream while allowing retentate reaction products to remain in the reaction zone and be discharged as a retentate stream. Ideally, the membrane assembly locates most of the membrane proximate the downstream portion of the reaction zone where accumulated produced water may be selectively removed from the reaction product as opposed to the upstream portion where relatively little water accumulation has occurred. A method for using the reactor to perform in situ water dehydration of reactions, such as Fischer-Tropsch reaction, is also disclosed.