Formaldehyde is an important intermediate that affects the catalyst performance in the methanol-to-hydrocarbons (MTH) conversion. In this study, photoelectron photoion coincidence spectroscopy was applied to elucidate the formation of this species in empty quartz and stainless steel reactors as well as over zeolite catalysts (ZSM-5 and BETA) and commonly used bed diluents (silicon carbide and quartz). The yields of formaldehyde in an empty stainless steel reactor and over the crude silicon carbide particles were found to be higher or comparable to those over the zeolite catalysts under similar reaction conditions. In the former two systems, formaldehyde is formed via methanol dehydrogenation, which is catalyzed by transition metals and yields hydrogen and carbon monoxide as the main byproducts. Thus produced formaldehyde is readily consumed in the MTH reaction, wherein its conversion is higher for the more acidic zeolites. The formaldehyde generated by the transition metal sites causes a decrease of the catalyst stability as well as a reduction of the propene-to-ethene ratio, as corroborated by catalytic tests exploring different contacting patterns between the ZSM-5 catalyst and stainless steel chips or silicon carbide particles. These results uncover an important role of methanol dehydrogenation in the MTH conversion, which is relevant for the laboratory testing of the zeolite catalysts and the industrial implementation of this technology.