Small distributed generation systems are currently attracting much attention because of their high energy utilization efficiency. Among them, a hybrid system based on micro gas turbine (μGT) and solid oxide fuel cell (SOFC) is expected to achieve much higher efficiency than a traditional μGT. In this paper, we investigate the effects of cycle design parameters on the performance and feasibility of a μGT-SOFC hybrid system for small apartments and businesses. As a result, a general design strategy is found that less direct fuel input to combustor as well as higher recuperator effectiveness leads to higher generation efficiency, while higher steam-carbon ratio moderates requirements for the material strength. It is also confirmed that the hybrid system is much superior to the recuperated gas turbine in terms of its power efficiency and aptitude for small distributed generation. A conceptual design of a 30kW μGT-SOFC hybrid system, of which diameter and height are 750mm and 1500mm, respectively, is shown to give power efficiency over 65% (LHV) in the best possible case.