Systematic studies of olefin synthesis from dimethyl ether (DME) in the presence of a hydrothermally treated HZSM-5 zeolite catalyst modified with magnesium have been conducted. Dependences of DME conversion, product yield and selectivity, and lower olefin ratio on space time in the temperature range of 320-360A degrees C have been analyzed. The type of the resulting products has been determined, and assumptions about the reaction chemistry have been made to reveal the role of methylation and hydrogen-transfer reactions in the products formation.