Molybdenum supported on zeolite HZSM-5 is the most studied catalyst for methane dehydroaromatization. However, the nature of its catalytic sites and their deactivation mechanisms remain unclear and controversial. Here, we report further insights into this system: first, the crystal size of HZSM-5 determines the form and location of the catalytic active MoCx species, and thus the catalyst performance; second, MoCx sites are preferentially deactivated over acid sites, when supported on nano-sized HZSM-5; third, MoCx particles that are traditionally considered detrimental to the reaction can serve as active sites, if they are properly protected from coke deposition. These findings lead us to develop an “encapsulation” strategy, which reconciles the deactivation rates of the MoCx and acid sites, enabling a full utilization of both sites, and consequently leading to a 10-fold increase in catalyst lifetime. Encapsulation also allows us to design experiments to confirm the catalytic role of the acid sites.