Hydrogenating CO2 into clean fuels and hydrocarbons such as methane, formic acid, and C2+ products is a viable strategy for mitigating anthropogenic carbon dioxide. Based on density functional theory calculations, we elucidate the mechanism of CO2 hydrogenation by Pd nanoparticles supported on MgO or CaO. To provide fundamental insight into the rational design of active and selective CO2 hydrogenation catalysts, we combined Pd, a hydrogen activator, and MgO or CaO, a CO2 binder. We found that Pd preferentially binds and dissociates H2, and the Pd-oxide interface activates CO2, completing a bifunctional CO2 hydrogenation reaction. The Pd-CaO interface strongly binds CO2 compared to the Pd-MgO interface. Therefore, the weakened C-O bond enables hydrogenation of the oxygen of CO2, activating the carboxyl pathway of CO2 hydrogenation and producing CO and methanol. In contrast, the formate pathway through direct hydrogenation of the carbon of CO2 operates in the Pd-MgO catalyst due to the relatively weak interaction with CO2. Producing formic acid and methanol is thermodynamically more accessible in Pd/MgO. Our results show that the catalyst-CO2 interaction steers the overall reaction pathway of thermocatalytic CO2 hydrogenation by metal/oxide class heterogeneous catalysts.