I’m not a baker, so this is probably grossly oversimplified, but two things come to mind.
First, kneading wheat flour and water together produces gluten. Gluten is a tough protein that enables doughs to be all stretchy without breaking.
Second, kneading with the yeast distributes the yeast throughout the dough. The yeast then consume sugars present in the dough (that you probably added as part of the recipe), producing alcohol and carbon dioxide. The carbon dioxide then forms little pockets trapped by the gluten, leavening the dough.
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