The most commonly applied industrial synthesis of 4,4′-methylene diphenyl diamine (4,4′-MDA), an important polyurethane intermediate, is the reaction of aniline and formaldehyde. Molecular understanding of the 4,4′-MDA formation can provide strategy to prevent from side reactions. In this work, a molecular mechanism consisted of eight consecutive, elementary reaction steps from anilines and formaldehyde to the formation of 4,4′-MDA in acidic media is proposed using accurate G3MP2B3 composite quantum chemical method. Then G3MP2B3-SMD results in aqueous and aniline solutions were compared to the gas phase mechanism. Based on the gas phase calculations standard enthalpy of formation, entropy and heat capacity values were evaluated using G3MP2B3 results for intermediates The proposed mechanism was critically evaluated and important side reactions are considered: the competition of formation of protonated p-aminobenzylaniline (PABAH+), protonated aminal (AMH+) and o-aminobenzylaniline (OABAH+). Competing reactions of the 4,4′-MDA formation is also thermodynamically analyzed such as the formation of 2,4-MDAH+, 3,4-MDAH+. AMH+ can be formed through loose transition state, but it becomes kinetic dead-end, while formation of significant amount of 2,4-MDA is plausible through low-lying transition state. The acid strength of the key intermediates such as N-methylenebenzeneanilium, PABAH+, 4-methylidenecyclohexa-2,5-diene-1-iminium, and AMH+ was estimated by relative pKa calculation.