Abstract Methane hydrates with underlying gas are promising for gas production commercially in case of accurate prediction and timely effective measures taken to control dynamic permeability. In a core holder, marine sediments sampled from South China Sea were used to remold hydrate muddy cores. Three consecutive gas production experimental results confirmed that the effective stress has a cumulative negative impact on the reservoir permeability. Thus, a modified Masuda permeability model considering the evolution of effective stress (0.2–5.0 MPa) and hydrate saturation (36.6%–53.1%) was proposed to calculate the dynamic permeability during depressurization. On this basis, dynamic permeability was applied to a mathematical model to study the production characteristics of hydrates with underlying gas. Compared with experimental measurements, the error of underlying gas pressure predicted by the model can be less than 1.92%. Besides, the precise trajectory of the hydrate dissociation front in the core was predicted by the model. The results indicated that the dynamic permeability is dominated by intrinsic permeability, and the effect of hydrate saturation is more significant than that of effective stress. The mathematical model could provide a simple yet practical method for estimating dynamic permeability and predicting gas production performances of hydrate reservoirs with underlying gas.