This sketch follows the argument presented by Kaye (1991). The first step in the proof is to show that, if M is any countable nonstandard model of PA, then the standard system of M (defined below) contains at least one nonrecursive set S. The second step is to show that, if either the addition or multiplication operation on M were recursive, then this set S would be recursive, which is a contradiction.
Through the methods used to code ordered tuples, each element
can be viewed as a code for a set
of elements of M. In particular, if we let
be the ith prime in M, then
. Each set
will be bounded in M, but if x is nonstandard then the set
may contain infinitely many standard natural numbers. The standard system of the model is the collection
. It can be shown that the standard system of any nonstandard model of PA contains a nonrecursive set, either by appealing to the incompleteness theorem or by directly considering a pair of recursively inseparable r.e. sets (Kaye 1991:154). These are disjoint r.e. sets
so that there is no recursive set
with
and
.
For the latter construction, begin with a pair of recursively inseparable r.e. sets A and B. For natural number x there is a y such that, for all i < x, if
then
and if
then
. By the overspill property, this means that there is some nonstandard x in M for which there is a (necessarily nonstandard) y in M so that, for every
with
, we have

Let
be the corresponding set in the standard system of M. Because A and B are r.e., one can show that
and
. Hence S is a separating set for A and B, and by the choice of A and B this means S is nonrecursive.
Now, to prove Tennenbaum's theorem, begin with a nonstandard countable model M and an element a in M so that
is nonrecursive. The proof method shows that, because of the way the standard system is defined, it is possible to compute the characteristic function of the set S using the addition function
of M as an oracle. In particular, if
is the element of M corresponding to 0, and
is the element of M corresponding to 1, then for each
we can compute
(i times). To decide if a number n is in S, first compute p, the nth prime in
. Then, search for an element y of M so that

for some
. This search will halt because the Euclidean algorithm can be applied to any model of PA. Finally, we have
if and only if the i found in the search was 0. Because S is not recursive, this means that the addition operation on M is nonrecursive.
A similar argument shows that it is possible to compute the characteristic function of S using the multiplication of M as an oracle, so the multiplication operation on M is also nonrecursive (Kaye 1991:154).