This Small Business Technology Transfer Research (STTR) Phase I proposal will overcome the most critical problems associated with the construction of a direct methanol fuel cell (DMFC): complex, bulky and heavy cell structures, low fuel efficiency, and high cost. These issues have severely impeded the successful commercialization of DMFCs for powering portable electronic devices. A commercially viable local vapor fuel cell (LVFC) will be developed which features (1) an integrated system design (with a compact, light-weight, and simple cell structure), (2) a highly efficient fuel conversion (high electro-catalytic efficiency and low fuel crossover), and (3) low cost. The high fuel efficiency is achieved by making the anode catalyst operate on fuel vapors at a higher local temperature. <br/><br/>PEM fuel cells generate electricity from oxygen and hydrogen, and emit only water and heat as by-products. Fuel cells offer a great combination of high power generating efficiencies with superior environmental performance (no noise and pollution). The fuel cell is commonly considered to be the engine that will drive the future hydrogen economy of the US and the world.