Density functional theory (DFT) calculations have been used to investigate the oxidative carbonylation of methanol on Pd(II)/β zeolite. Activation energies for all the elementary steps involved in the commonly accepted mechanism, including the formation of dimethyl carbonate, methyl formate and dimethoxymethane, are presented. Upon conducting the calculations, we identify that the Pd(2+) cation bonded with four O atoms of the zeolite framework acts as the active site of the catalyst. Molecularly adsorbed methanol starts to react with oxygen molecules to produce a methanediol intermediate (CH2(OH)2) and O atom. Then, another methanol can react with the O atom to produce the (CH3O)(OH)-Pd(II)/β zeolite species. (CH3O)(OH)-Pd(II)/β zeolite can further react with carbon monoxide or methanol to give monomethyl carbonate or di-methoxide species ((CH3O)2-Pd(II)/β zeolite). Dimethyl carbonate can form via two distinct reaction pathways: (I) methanol reacts with monomethyl carbonate or (II) carbon monoxide inserts into di-methoxide. Our calculation results show the activation energy of reaction (I) is too high to be achieved. The methanediol intermediate is unstable and can decompose to formaldehyde and H2O immediately. Formaldehyde can either react with an O atom or methanol to form formic acid or a CH3OCH2OH intermediate. Both of them can react with methanol to form the secondary products (methyl formate or dimethoxymethane). Upon conducting calculations, we confirmed that the activation energies for the formation of methyl formate and dimethoxymethane are higher than that of dimethyl carbonate. All these conformations were characterized at the same calculation level.