Vacuum multi-effect membrane distillation is an advanced system that possesses the features and merits of vacuum membrane distillation and multi-effect distillation. It has low operating pressure and temperature, high levels of non-volatile rejection and high energy efficiency. This study presents a thermo-economic analysis and optimization of this novel system. A thermodynamic analysis is firstly conducted to evaluate the productivity and the energy consumption under varying design and operational conditions. Special emphases are placed on the impacts of the system configuration, including the number of effects and the overall membrane area, which are rarely covered in the literature. Results reveal that there is a trade-off between the production rate and the energy consumption with respect to most of the operating parameters, e.g. the feed flowrate and the cooling water flowrate. An increase in the number of effects and the membrane area will reduce the energy consumption, but the specific permeate flux for the unit membrane area also becomes lower. To obtain the optimal parameters that minimize the desalination cost, an economic study is then carried out considering a wide range of thermal energy prices. It is observed that a higher feed flowrate, more numbers of effects and larger membrane areas are preferable when the energy price is higher. However, when thermal energy with low prices is available, lower feed flowrates and smaller membrane areas are recommended. The derived results will provide useful information on the vacuum multi-effect membrane distillation system for its future design and operation.