CO2 hydrogenation to methanol is of great environmental and economic interest due to its potential to reduce carbon emissions and produce valuable chemicals in one single reaction. Compared with the unmodified traditional Cu/ZnO/Al2O3 catalyst, an indium oxide (In2O3)-based catalyst can double the methanol selectivity from 30–50 to 60–100%. It is worth noting that over catalysts involving various active metals dispersed on indium oxide (M/In2O3, M = Pd, Ni, Au, etc.), although the methanol yield is boosted, the selectivity remains similar to that of plain In2O3 despite the distinct chemical properties of the added metals. To investigate the phenomena behind this behavior, here we used RuO2/In2O3 as a test catalyst. The results of ambient pressure photoelectron spectroscopy, in situ X-ray absorption fine structure, and time-resolved X-ray diffraction indicate that the structure of the RuO2/In2O3 catalyst is highly dynamic in the presence of a reactive environment. Specifically, under CO2 hydrogenation conditions, Ru clusters facilitate the reduction of In2O3 to generate In2O3–x aggregates, which encapsulate the Ru systems in a migration driven by thermodynamics. In this way, the Ru0 sites for CH4 production are blocked while creating RuOx–In2O3–x interfacial sites with tunable metal–oxide interactions for selective methanol production. In an inverse oxide/metal configuration, indium oxide has properties not seen in its bulk phase that are useful for the binding and conversion of CO2. This work reveals the dynamic nature of In2O3-based catalysts, providing insights for a rational design of materials for the selective synthesis of methanol.