Silver catalyst has been extensively investigated for photocatalytic and electrochemical CO2 reduction. However, its high activity for selective hydrogenation of CO2 to methanol has not been confirmed. Here, the feasibility of the indium oxide supported silver catalyst was investigated for CO2 hydrogenation to methanol by the density functional theoretical (DFT) study and then by the experimental investigation. The DFT study shows there exists an intense Ag–In2O3 interaction, which causes silver to be positively charged. The positively charged Ag species changes the electronic structure of the metal, facilitates the formation of the Ag–In2O3 interfacial site for activation and dissociation of carbon dioxide. The promoted CO2 dissociation leads to the enhanced methanol synthesis via the CO hydrogenation route as CO2∗→CO∗→HCO∗→H2CO∗→H3CO∗→H3COH∗. The Ag/In2O3 catalyst was then prepared using the deposition-precipitation method. The experimental study confirms the theoretical prediction. The methanol selectivity of CO2 hydrogenation on Ag/In2O3 reaches 100.0% at reaction temperature of 200 °C. It remains more than 70.0% between 200 and 275 °C. At 300 °C and 5 MPa, the methanol selectivity still keeps 58.2% with a CO2 conversion of 13.6% and a space-time yield (STY) of methanol of 0.453 gmethanol gcat−1 h−1, which is the highest methanol STY ever reported for silver catalyst. The catalyst characterization confirms the intense Ag–In2O3 interaction as well, which causes high Ag dispersion, increases and stabilizes the oxygen vacancies and creates the active Ag–In2O3 interfacial site for the enhanced CO2 hydrogenation to methanol.