A novel dicationic ionic liquid, N,N,N′,N′-tetramethyl-N,N′-bis(sulfo)ethane-1,2-diaminium mesylate [TMBSED][OMs]2), has been produced, and identified by analysis of its 1H NMR, 13C NMR, FT-IR, mass and thermal gravimetric data. Thereafter, it has been utilized as a highly effectual, homogeneous and dual-functional catalyst to promote the multi-component reaction of ethyl acetoacetate, hydroxylamine hydrochloride and arylaldehydes under solvent-free conditions for the synthesis of 3-methyl-4-arylmethylene-isoxazole-5(4H)-ones. Due to the dual-functionality of [TMBSED][OMs]2 (possessing acidic and basic sites), and also having two sites of each, it was a highly effective and general catalyst for the synthesis. Moreover, a plausible and attractive mechanism based on the dual-functionality of the catalyst has been proposed.