The acid form of zeolites containing 8-membered ring channels catalyze the selective (>99%) carbonylation of dimethyl ether (DME) to methyl acetate at low-temperature (408-453 K), while acidit OH groups in 10-MR or 12-MR environments lead to undetectable carbolylation rates. Methyl acetate synthesis rates are proportional to CO pressure (up to ∼ 1 MPa) and independent of DME pressure. Water strongly inhibited rates but did not influence these CO and DME kinetic dependences. Carbonylation proceeds via initiation steps that form methyl groups via reactions of DME with acidic OH groups. The subsequent propagation cycle involves slow carbonylation of methyls to form acetyl groups and their fast methoxylation by DME to form methyl acetate, while concurrently regenerating methyl intermediates in a catalytic cycle that avoids the formation of water and its inhibitory effects, prevalent in similar reactions of methanol. Carbon-carbon bond formation via CO insertion into bound methyl groups occurs selectively within 8-membered ring (8-MR) channels and the transition state for this reaction appears to be uniquely stabilized by the constrained environments present within 8-MR zeolite structures. This specificity in methyl reactivity upon confinement within small channels appears to be unprecedented in catalysis by microporous materials, which typically influence selectivity via size exclusion of reactants, products or transition states.