Density functional theory is used to study one of the most successful routes to the production of synthetic fuels, the conversion of methanol to gasoline (MTG process) with an acidic zeolite. With our calculations we have determined transition states and adsorption complexes of reactants, intermediates, and products as well as the corresponding activation barriers and adsorption energies of the numerous reactions involved in such a process. Bronsted acid catalyzed methanol dehydration to dimethyl ether is the first step of the MTG process. Two different mechanisms are possible. One proceeds via an associative interaction between two methanol molecules, generating directly dimethyl ether, while the other proceeds via a methoxy surface species intermediate. The presence of water lowers the activation barrier of the last mechanism by more than 50 kJ/mol. Our calculations suggest that ethanol and ethyl methyl ether are the first formed species with a C-C bond. Several different mechanisms for those reactions have been studied. The activation barriers involved in such reactions are of the order of 300 kJ/mol for both ethanol and ethyl methyl ether. Without coadsorbed water, the activation barriers are 60 kJ/mol higher. In a following step ethylene is formed from alcohol or ether. Those reactions are very fast due to a very low activation barrier. Trimethyloxonium, proposed to be an intermediate in the formation of ethyl methyl ether, can be excluded as an intermediate for the C-C bond formation. Although it can be formed, its further reaction to ethanol or ethyl methyl ether involves activation barriers that are over 80-150 kJ/mol higher than their formation directly from dimethyl ether and methanol. Reaction paths for the formation of methane and formaldehyde, which are observed in reactions for very low methanol coverages, have also been studied.