The dry (CO2) reforming of CH4 (DRM) for syngas production is presently one of the most promising processes for CO2 utilization. Revealing the role of oxygen defects at ZrO2/Pd catalyst in DRM is crucial for the rational design and regulation of highly efficient and stable catalyst. This work employed first-principle calculations and microkinetic modeling to explore the DRM reaction mechanism on ZrO2/Pd at the atomic level. It is found that the reduction of perfect ZrO2 into Zr is impossible but the full reduction of hydroxylated zirconia ZrOxHy into Zr is feasible thermodynamically under the ultrahigh vacuum condition. The formation of O vacancy at the hydroxylated phase boundary of ZrO2/Pd is feasible kinetically and thermodynamically as well. The yielded coordinatively unsaturated metal active center at the phase boundary of ZrO2/Pd can efficiently activate CO2 and promote the rate-limiting step of DRM. Both density-functional theory calculations and microkinetic modeling revealed a low surface carbon coverage at the phase boundary of ZrO2/Pd. This work proves the vital role of O vacancy and metal-oxide phase boundary in improving the DRM activity.