Exchanged (Mo2O7)(2-) dimers form during treatment in air of MoO3/H-ZSM-5 (Si/Al=14.3) physical mixtures at 773-973 K. The amount of water desorbed during exchange and the number of residual protons (measured by D-2-OH exchange) showed that each Mo6+ replaces 1.1 (+/- 0.1) protons in H-ZSM-5 (for Mo/Al<0.37). Al-27 NMR, X-ray absorption, and Raman spectra confirmed the proposed (Mo2O7)(2-) structure and its location at zeolite exchange sites. When the Mo content exceeds that required to form a MoOx bilayer on the external zeolite surface (Mo/Al approximate to 0.5), MoOx sublimes or forms Al-2(MoO4)(3) by extracting framework Al; Al-2(MoO4)(3) domains reduce slowly and lead to low CH4 reaction rates. The rate of hydrocarbon synthesis from CH4 at 930-973 K increased as exchanged MoOx dimers reduce and carburize during CH4 reactions. About 2.5 O atoms per Mo (+/-0.1) are removed as CO, CO2, and H2O during activation, suggesting that all but the zeolite framework oxygen atoms are removed during activation. Reduction and carburization rates depend on Mo content and on the rate of removal of CO, CO2, and H2O, which inhibit reduction/carburization steps. Hydrocarbons were not detected during the initial removal of about one O per Mo, but ethylene, benzene, naphthalene, and H-2 formation rates increased as larger amounts of O were removed during CH4 reactions. CH4 reactions require initial activation of CH4 on MoOx, but with the retention of C-atoms to form MoCx. These MoCx then activate C-H bonds and desorb the hydrocarbons formed, which then oligomerize and cyclize via rapid bifunctional pathways on H+ and MoCx sites within constrained ZSM-5 channels. (C) 2000 Elsevier Science B.V. All rights reserved.