Photocatalytic reduction of carbon dioxide (CO2) into hydrocarbons is an attractive approach for mitigating CO2 emission and generating useful fuels at the same time. Titania (TiO2) is one of the most promising photocatalysts for this purpose, and nanostructured TiO2 materials often lead to an increased efficiency for the photocatalytic reactions. However, what aspects of and how such nanomaterials play the important role in the improved efficiency are yet to be understood. Using first-principles calculations, reaction mechanisms on the surface of bulk anatase TiO2(101) and of a small TiO2 nanocluster were investigated to elucidate the role of four-fold coordinated titanium atoms and quantum confinement (QC) in the CO2 reduction. Significant barrier reduction observed on the nanocluster surface is discussed in terms of how the under-coordinated titanium atoms and QC influence CO2 reduction kinetics at surface. It is shown that the reduction to CO can be greatly facilitated by the under-coordinated titanium atoms, and they also make CO2 anion formation favorable at surfaces.