The electrocatalytic reduction of carbon dioxide is a promising approach for storing (excess) renewable electricity as chemical energy in fuels. Here, we review recent advances and challenges in the understanding of electrochemical CO2 reduction. We discuss existing models for the initial activation of CO2 on the electrocatalyst and their importance for understanding selectivity. Carbon–carbon bond formation is also a key mechanistic step in CO2 electroreduction to high-density and high-value fuels. We show that both the initial CO2 activation and C–C bond formation are influenced by an intricate interplay between surface structure (both on the nano- and on the mesoscale), electrolyte effects (pH, buffer strength, ion effects) and mass transport conditions. This complex interplay is currently still far from being completely understood. In addition, we discuss recent progress in in situ spectroscopic techniques and computational techniques for mechanistic work. Finally, we identify some challenges in furthering our understanding of these themes.