Dimethyl ether has a high cetane number, low auto-ignition temperature, low boiling point, presence of an oxygen atom, and absence of a carbon–carbon bond, making it a promising alternate fuel for compression ignition engines. Many experimental studies have been done on dimethyl ether-fuelled engines, which show that their combustion is almost sootless. Theoretically, dimethyl ether has a low-carbon-to-hydrogen ratio, which reduces carbon dioxide emissions. However, a complete life cycle analysis of its different production methods is paramount in addition to engine experiments. Dimethyl ether can be produced from a variety of renewable and non-renewable feedstocks. These feedstocks are converted into synthesis gas or syngas, a carbon monoxide and hydrogen mixture. Dimethyl ether can be produced from syngas in two ways. The first method is a two-step process or indirect synthesis in which syngas is first converted into methanol, and then methanol is dehydrated into dimethyl ether. The second method of dimethyl ether production is a one-step process or direct synthesis. In this method, syngas is directly converted into dimethyl ether using catalysts. The direct synthesis of dimethyl ether from syngas is proven to have more technical and economic advantages over the indirect synthesis via methanol. Also, atmospheric carbon dioxide generated by humankind, industrial applications, and conventional fuelled vehicles can be reacted with hydrogen using renewable energy sources and catalytically converted into dimethyl ether, forming a closed carbon cycle. This chapter examines the different pathways of DME production, such as biomass, municipal solid waste (MSW), methanol, coal, and natural gas. Novel techniques of DME production, such as sorption-enhanced DME synthesis (SEDMES) and atmospheric carbon-captured-based DME, have also been discussed. Furthermore, the life cycle emissions and techno-economic analysis (TEA) of DME production from renewable and non-renewable sources for well-to-pump pathways have been analysed. Lastly, a case study using GREET software was carried out, in which the life cycle assessment (LCA) and TEA results of DME production from CO2 capture were compared with those of MSW-based DME and crude oil-based diesel production. The GHG and human toxic emissions were calculated at different stages of fuel production, ranging from raw material extraction to final fuel distribution. The results showed that carbon-captured-based DME could be environmentally and economically feasible in India if produced from 100% renewable (Solar) sourced electricity. In addition, this technology can help replace 15% of low-sulphur diesel (LSD) with DME at no additional cost to the economy, potentially avoiding 15% of diesel imports from the total crude oil import bill and improving national self-reliance on diesel by the same margin.