Understanding the atomic-level changes that occur as kaolinite is converted (thermally dehydroxylated) to metakaolin is critical to the optimization of this large-scale industrial process. Metakaolin is X-ray amorphous; therefore, conventional crystallographic techniques do not reveal the changes in local structure during its formation. Local structure-based experimental techniques are useful in understanding the atomic structure but do not provide the thermodynamic information which is necessary to ensure plausibility of refined structures. Here, kaolinite dehydroxylation is modeled using density functional theory, and a stepwise methodology, where several water molecules are removed from the structure, geometry optimization is carried out, and then the process is repeated. Hence, the structure remains in an energetically and thermodynamically feasible state while transitioning from kaolinite to metakaolin. The structures generated during the dehydroxylation process are validated by comparison with X-ray and neutron pair distribution function data. Thus, this study illustrates one possible route by which dehydroxylation of kaolinite can take place, revealing a chemically, energetically, and experimentally plausible structure of metakaolin. This methodology of density functional modeling of the stepwise changes in a material is not limited in application to kaolinite or other aluminosilicates and provides an accurate representation of the local structural changes occurring in materials used in industrially important processes.