Abstract During CO 2 methanation, the generation of H 2 O as a by‐product can lead to its strong adsorption on the catalyst's active sites, potentially blocking them or altering the active phase, thereby degrading catalytic performance. To mitigate this inhibition effect by water, we introduce a hydrophobic surface via stearic acid treatment to rapidly remove H 2 O formed during CO 2 methanation over NiAl mixed metal oxide (MMO)‐derived catalysts. The crystal structure of NiAl MMO and the average Ni particle size of ∼13 nm remain unaltered by the hydrophobic treatment. The NiAl catalyst treated with an optimal concentration of stearic acid shows a nearly doubled CO 2 conversion of 61.4% at 275 °C, compared to the pristine catalyst, and this high activity is sustained for over 100 h without deactivation. However, excessive stearic acid coverage inhibits CO 2 adsorption significantly, causing a sharp drop in CO 2 conversion to 10.8%. This study demonstrates that hydrophobic surface modification can effectively ameliorate catalyst deactivation due to by‐product H 2 O, which could be applied to many other catalytic reactions where H 2 O acts as an inhibiting by‐product.