2,5-Dimethyltetrahydrofuran (DMTHF) can be produced catalytically from biomass derived carbohydrates in one step with high yield. DMTHF is superior to ethanol and has all the desirable properties currently found in typical petroleum-derived transportation fuels. Thus, DMTHF could be readily incorporated into the existing transportation infrastructure. The reaction employs a soluble rhodium catalyst, dihydrogen, and hydroiodic acid in biphasic solution. Fructose and glucose give up to 85% and 75% yield of DMTHF, respectively. Cellulose can also be used directly in this reaction but gives a somewhat lower yield. The process is proposed to go through a combination of dehydration, hydrogenolysis and hydrogenation steps. The catalytic system is robust and can be recycled repeatedly without loss of activity.