Catalytic hydrogenation presents a promising approach for converting CO2 into valuable chemicals and fuels, crucial for climate change mitigation. Iron-based catalysts have emerged as key contributors, particularly in driving the reverse water–gas shift and Fischer–Tropsch synthesis reactions. Recent research has focused on enhancing the efficiency and selectivity of these catalysts by incorporating alkali metal promoters or transition metal dopants, enabling precise adjustments to their composition and properties. This review synthesizes recent theoretical advancements in CO2 hydrogenation with iron-based catalysts, employing density functional theory and microkinetic modeling. By elucidating the underlying mechanisms involving metallic iron, iron oxides, and iron carbides, we address current challenges and provide insights for future sustainable CO2 hydrogenation developments.