Flame-assisted fuel cell (FFC) systems have been investigated and developed for small scale power generation applications. The introduction of micro-combustion into the FFC setup has potential to increase the electrical efficiency of the system and reduce the size. However, micro-combustion at high equivalence ratios in FFC systems still needs more investigation. In this paper, a FFC system with micro-combustion at high equivalence ratios is discussed. The thermal and mass balance in this system are analyzed to evaluate the theoretical possibility of self-sustained micro-combustion at high equivalence ratios in FFC systems. The effect of heat recirculation on the system performance is investigated. Due to operation at high equivalence ratios, the electrical efficiency of the system is competitive with other micro-scale power generation systems and also shows great potential for high performance micro combined heat and power (CHP) systems.