In this paper the modeling of combined heat and power (CHP) system driven by Stirling engine has been discussed. The system consists of one beta type Stirling engine as the prime mover, heat recovery system, power generator and the auxiliary boiler. The analysis of the Stirling engine is a non-ideal adiabatic analysis. To increase the accuracy of modeling, the frictional and thermal losses of Stirling engine are considered in comparison of other previous studies and the non-ideal adiabatic analysis is performed using a developed numerical code in MATLAB software. For model validation, the operational and geometrical specification of the GPU-3 Stirling engine was used and the results were compared with experimental results and other previous models. Then, one beta-type Stirling engine was proposed as prime mover in cogeneration system for building applications. The use of the cogeneration systems in building applications becomes more common, which system from the perspective of the fuel consumption and pollution emission, have a significant advantage in comparison with the other conventional systems. For this purpose, the effects of engine frequency, regenerator length, and heat source temperature on fuel consumption and pollution emission of system were examined and proper engine design parameters were selected. Finally, the electric power and thermal power were achieved 11263 W and 21653 W, respectively, with reduction in fuel consumption and pollution emission of 37% and 42%, respectively.