Identifying the dynamic structure of heterogeneous catalysts is crucial for the rational design of new ones. In this contribution, the structural evolution of Fe(0) catalysts during CO
2
hydrogenation to hydrocarbons has been investigated by using several (quasi) in situ techniques. Upon initial reduction, Fe species are carburized to Fe
3
C and then to Fe
5
C
2
. The by-product of CO
2
hydrogenation, H
2
O, oxidizes the iron carbide to Fe
3
O
4
. The formation of Fe
3
O
4
@(Fe
5
C
2
+Fe
3
O
4
) core-shell structure was observed at steady state, and the surface composition depends on the balance of oxidation and carburization, where water plays a key role in the oxidation. The performance of CO
2
hydrogenation was also correlated with the dynamic surface structure. Theoretical calculations and controll experiments reveal the interdependence between the phase transition and reactive environment. We also suggest a practical way to tune the competitive reactions to maintain an Fe
5
C
2
-rich surface for a desired C
2+
productivity.