In order to know well the range and degree of gas hydrate dissociation during the large-scale exploitation of marine natural gas hydrate, the finite element software COMSOL is used to simulate the electromagnetic monitoring of the natural gas hydrate exploitation through the downhole controlled-source electromagnetic (CSEM) method. By constructing the 3D formation model containing the high-resistivity hydrate reservoir layer, the comparison between the downhole vertical source and the conventional towed horizontal source indicates that the former has advantages on the electric field responses for small source-receiver offsets required for monitoring. Then, the influence of vertical source monitoring system parameters, such as metal casing, vertical source depth, emission frequency, observation errors and noises, on the seafloor electric field responses are analyzed. The simulation results show that the metal casing, vertical source depth and emission frequency have significant influences on the seafloor electric field responses, and especially for the existence of metal casing, the vertical source should be placed below the hydrate reservoir and the low frequency such as 1 Hz of emission electrical current should be considered. The observation errors and noises of the monitoring system would not significantly affect the performance of the monitoring system with metal casing under the condition of small offsets. When the production range of the hydrate reservoir increases, the downhole vertical source monitoring system ensures that seafloor receivers can detect the electric field changes caused by hydrate exploitation and effectively identify the lateral boundary of production area. Hence, it is feasible to use the downhole CSEM method to monitor the dynamic reservoir process during marine hydrate exploitation.