The challenges posed by energy and environmental issues have forced mankind to explore and utilize unconventional energy sources. It is imperative to convert the abundant coalbed gas (CBG) into high value-added products, i.e., selective and efficient conversion of methane from CBG. Methane activation, known as the “holy grail”, poses a challenge to the design and development of catalysts. The structural complexity of the active metal on the carrier is of particular concern. In this work, we have studied the nucleation growth of small Co clusters (up to Co₆) on the surface of CeO₂(110) using density functional theory, from which a stable loaded Co/CeO₂(110) structure was selected to investigate the methane activation mechanism. Despite the relatively small size of the selected Co clusters, the obtained Co_x/CeO₂(110) exhibits interesting properties. The optimized Co₅/CeO₂(110) structure was selected as the optimal structure to study the activation mechanism of methane due to its competitive electronic structure, adsorption energy and binding energy. The energy barriers for the stepwise dissociation of methane to form CH₃*, CH₂*, CH*, and C* radical fragments are 0.44, 0.55, 0.31, and 1.20 eV, respectively, indicating that CH* dissociative dehydrogenation is the rate-determining step for the system under investigation here. This fundamental study of metal-support interactions based on Co growth on the CeO₂(110) surface contributes to the understanding of the essence of Co/CeO₂ catalysts with promising catalytic behavior. It provides theoretical guidance for better designing the optimal Co/CeO₂ catalyst for tailored catalytic reactions.