Synthesis of clean fuels like methanol and DME from CO2 over a bifunctional catalysts can play a vital role to potentially utilize the CO2 and replacing fossil fuels. In the present study the role of Zr in Cu/ZnO precursor chemistry is described. Effect of ZrO2 promotion on physicochemical properties of Cu/ZnO based catalyst is investigated. The Cu-ZnO-ZrO2 catalyst was synthesized by constant pH co-precipitation method and characterized by XRD, BET, H2-TPR, CO2-TPD, FESEM, HR-TEM and XPS techniques. The characterization reveals synergistic interaction between Cu, Zn and Zr oxides acts as the driving element for maximizing the catalytic performance. The substitution of Zr by Zn into the lattice of tetragonal ZrO2 leads to synergetic interaction which enhanced Cu oxide reducibility and surface oxygen defects. More interestingly, ZrO2 alters the acidity of bifunctional Cu-ZnO-ZrO2/hierarchical ZSM5 catalyst and tunes the concentration of weak and moderate acidic sites, thereby regulating DME selectivity. The activity of tandem catalyst was evaluated at 30 bar, 2400 mLgcat-1h-1 within temperature range of 220–280 °C. The methanol and DME selectivity reaches up to 19% and 60% respectively with 14% CO2 conversion at 260 °C. These deeper insights into the chemistry of ZrO2 helps in developing paradigm for designing highly selective catalysts for effective CO2 hydrogenation.