Use of internal fiducial markers and electronic portal imaging (EPI) to realign patients has been shown to significantly reduce positioning uncertainties in prostate radiation treatment. This creates the possibility of improving the treatment by decreasing the planning target volume (PTV) margin added to the clinical target volume (CTV), which in turn may allow dose escalation. Conformal treatment plans for three prostate cancer patients were evaluated by using different PTV margins with dose prescription of 70 Gy/35 fr initially. Two beam arrangements, 4-field-box (4FB) and 4-field-oblique (4FO), were used. Then, two dose escalation schemes, 74 Gy and 78 Gy, with tighter PTV margins, were chosen from the first simulation and were tested. A Monte Carlo model was developed to simulate the daily geometric uncertainty and calculate the dose to each organ. After the whole treatment, dose-volume histograms were produced and tumour control probability, prostate equivalent uniform dose and the effective dose to critical organs were calculated. By comparing these radiobiological metrics, optimized dose escalation schemes were found. The results show that using internal fiducial markers and EPI, the prescription dose can be escalated to 78 Gy/39 fr with a 4 mm PTV margin. Based on the available dose-response data for intermediate risk prostate patients, this is estimated to result in a 20% increase of local control and significantly reduced rectal complications.