The catalytic dehydrogenation of ethane over gallyl ions (GaO+) as a model for the active sites in oxidized Ga/ZSM-5 zeolite was studied using a density functional theory cluster modeling approach. Initial activation of ethane occurs either via heterolytic dissociation of the C-H bond over the gallyl ion following an "alkyl"-type mechanism or via oxidation by the extralattice oxygen atom resulting in formation of an adsorbed ethanol molecule. In the latter case, ethanol rapidly reacts with the adsorption site producing a stable intermediate corresponding to the so-called "carbenium" initial activation. Both these paths are kinetically and thermodynamically favored as compared to the initial C-H activation over reduced gallium species. However, the subsequent regeneration of the gallyl ion is very difficult. It is shown that the reduction of the gallyl ions upon the catalytic reaction is strongly preferred over the regeneration of the active sites. In addition, possible side reactions involving conversion of ethanol over GaO+ sites were discussed. Although several catalytic cycles can be expected to occur over the gallyl ions via a reaction channel involving one-step conversion of additional ethane molecules over the stable intermediates of the primary dehydrogenation path, these sites cannot be responsible for the reasonably stable catalytic activity of the oxidized Ga/ZSM-5 zeolites.