Promotional effects of oxygen vacancies of spinel catalysts in CO2 hydrogenation are reported in early works, but the mechanistic origins remain elusive. Here, CoAl2O4 spinels with varying numbers of oxygen vacancies are deliberately designed by a sol-gel method and different post-treatments. By combining catalytic testing, advanced electron microscopic and spectroscopic characterizations, and computational studies, the unusual oxygen vacancy-dependent catalytic behaviors are rationalized. Our work reveals that i) perfect spinel crystals possessing least oxygen vacancies can effectively constrain the Co2+ species at working conditions that are less active but selective to CO; and ii) vacancy-rich spinels promote both H2 and CO2 activations and COOH* formation, explaining the higher hydrogenation activity, but overwhelming vacancies cause Co2+ reduction and promote direct CO2 * dissociation to CO* and deep hydrogenation to CH4. These molecular-level understandings reinforce the idea of proper design of oxygen vacancies to achieve activity-selectivity balance.