a) contacting the methanol feed with an acidic alumina catalyst in a first reaction zone at etherification conditions effective to form a DME-containing effluent stream and to shift at least 10% of the exothermic heat of reaction liberated when methanol is converted to propylene from the subsequent propylene synthesis step to this etherification step, thereby heating the DME-containing effluent stream to a temperature of about 250 to 450° C. and producing by-product water in an amount of at least 0.5 mole per mole of methanol converted;

b) adjusting the temperature of the resulting DME-containing effluent to a range of about 375 to 525° C. and adding diluent thereto to produce a heated mixture of DME, unreacted methanol and diluent;

c) reacting the resulting heated mixture with dual-function catalyst particles containing a molecular sieve, having the ability to convert the oxygenates contained therein to C₃ olefin and to interconvert C₂ and C₄⁺ olefins to C₃ olefin, in a second reaction zone containing at least three moving bed reactors wherein each of the reactors is operated at oxygenate conversion conditions effective to convert the oxygenates contained in the mixture to propylene and at a catalyst circulation rate through the second reaction zone selected to result in a catalyst on-stream cycle time of 300 hours or less to produce a propylene-containing effluent stream containing major amounts of a C₃ olefin product and water, lesser amounts of a C₂ olefin, C₄⁺ olefins and C₁ to C₄⁺ saturated hydrocarbons and minor amounts of unreacted oxygenate, by-product oxygenates and aromatic hydrocarbons and wherein the moving bed reactors are connected in a serial flow configuration with respect to the flow of the heated mixture fed thereto and with respect to the stream of catalyst that passes therethrough;

d) passing the propylene-containing effluent stream to a separation zone and therein cooling and separating this effluent stream into a vaporous fraction rich in C₃ olefin, a water fraction containing unreacted oxygenates and by-product oxygenates and a liquid hydrocarbon fraction containing heavier olefins, heavier saturated hydrocarbons and minor amounts of aromatic hydrocarbons;

e) recycling at least a portion of the water fraction recovered in step d) to step b) to provide at least a portion of the diluent added therein;

f) separating the vaporous fraction into a C₂ olefin-rich fraction, a C₃ olefin-rich product fraction and a C₄⁺ olefin-rich fraction;

g) recycling at least a portion of the C₂ olefin-rich fraction or of the C₄⁺ olefin-rich fraction or of a mixture of these fractions to step c); and

h) withdrawing coke-containing dual-function catalyst particles from the second reaction zone, oxidatively regenerating the withdrawn catalyst particles in a regeneration zone and returning a stream of regenerated catalyst particles to the second reaction zone.