A density functional theory (DFT) study has been conducted in this work to investigate the reaction mechanism of synthesis of oxygenates and higher hydrocarbons from methane (CH4) and carbon dioxide (CO2), using cold plasmas. The main dissociation routes of the reactants were analyzed. The feasibility of the formation of various products, including syngas, higher hydrocarbons, and oxygenates, was discussed. The DFT study confirmed that the major obstacle of the synthesis is the dissociation of the reactants CH4 and CO2. After the cold plasma has supplied the necessary energy for the dissociation of CH4 and CO2, syngas, higher hydrocarbons, and oxygenates can be then easily produced. The present DFT study also demonstrates that the plasma synthesis will normally lead to a formation of a mixture of syngas, higher hydrocarbons, and oxygenates.