Density functional theory (DFT) calculations were carried Out ill a Study of oxidation of methane to methanol by N2O on the Fe- and Co-ZSM-5 clusters. The catalytic cycle steps have been Studied oil model Clusters ((SiH3)(4)AlO4M) (where M = Fe, Co). Calculations indicate very low methanol selectivity Without water and increasing rate of methanol formation with water. These results are in qualitative agreement with the experimental literature. The methanol formation step is also found to be the rate-limiting step, and this result is in agreement with other theoretical work. Co-ZSM-5 cluster has a lower activation barrier when compared to that of Fe-ZSM-5 cluster (49 kcal/mol vs 53 kcal/mol). Activation barrier values decrease to 48 and 39 kcal/mol for Fe- and Co-ZSM-5 Clusters, respectively, in the presence of water molecule adsorbed after the formation of I hydroxy group oil the ZSM-5 surface. The methanol formation step is the most difficult reaction for both Clusters with and without water.