Catalytic systems consisting of copper oxide and bismuth oxide are commonly employed for the industrial production of 1,4-butynediol (BD) through ethynylation. However, few studies have investigated the influence mechanism of Bi for these Cu-based catalysts. Herein, a series of nanostructured CuO-Bi2O3 catalysts were prepared by co-precipitation followed by calcination at different temperatures. The obtained catalysts were applied to the ethynylation reaction. The textural and crystal properties of the catalysts, their reduction behavior, and the interactions between copper and bismuth species, were found to strongly depend on temperature. When calcined at 600 °C, strong interactions between Cu and Bi in the CuO phase facilitated the formation of highly dispersed active cuprous sites and stabilized the Cu+ valency, resulting in the highest BD yield. Bi2O3 was completely absent when calcined at 700 °C, having been converted into the spinel CuBi2O4 phase. Spinel Cu2+ was released gradually to form active Cu+ species over eight catalytic cycles, which continuously replenished the decreasing activity resulting from the formation of metallic Cu and enhanced catalytic stability. Moreover, the positive correlation between the in-situ-formed surface Cu+ ions and BD yield suggests that the amount of Cu+ ions is the key factor for ethynylation of formaldehyde to BD on the as prepared CuO-Bi2O3 catalysts. Based on these results and the literature, we propose an ethynylation reaction mechanism for CuO-based catalysts and provide a simple design strategy for highly efficient catalytic CuO-Bi2O3 systems, which has considerable potential for industrial applications.