In situ structural and chemical state characterization of Rh/CeO2 and Ni/CeO2 catalysts during atmospheric pressure CO2 methanation has been performed by a combined array of time-resolved analytical techniques including ambient-pressure X-ray photoelectron spectroscopy, high-energy X-ray diffraction and diffuse reflectance infrared Fourier transform spectroscopy. The ceria phase is partially reduced during the CO2 methanation and in particular Ce3+ species seem to facilitate activation of CO2 molecules. The activated CO2 molecules then react with atomic hydrogen provided from H-2 dissociation on Rh and Ni sites to form formate species. For the most active catalyst (Rh/CeO2), transmission electron microscopy measurements show that the Rh nanoparticles are small (average 4 nm, but with a long tail towards smaller particles) due to a strong interaction between Rh particles and the ceria phase. In contrast, larger nanoparticles were observed for the Ni/CeO2 catalyst (average 6 nm, with no crystallites below 5 nm found), suggesting a weaker interaction with the ceria phase. The higher selectivity towards methane of Rh/CeO2 is proposed to be due to the stronger metal-support interaction.