Ru0.05Ce0.95Ox is an active catalyst for methanation of CO2 with H2. Under reaction conditions one expects that oxygen vacancies are present on the oxide catalyst surface and that their steady-state concentration depends upon the relative ratio of the oxidant (CO2) to the reductant (H2). We show that the activity of the catalyst is sensitive to the degree of surface reduction: a surface that is too reduced or too oxidized loses activity. Exposing the oxidized surface to CO2 and then to H2 produces no methane, while on a reduced surface methane is produced by exposure to CO2 followed by H2. If the reaction is carried out at the steady state, purged, and then exposed to only hydrogen, methane is produced. Methane is formed through the reaction of hydrogen with surface species, whose infrared spectrum is associated with a variety of surface carbonates, and not through CO or a formate intermediate.