In situ soft X-ray absorption spectroscopy (XAS) was employed to study the adsorption and dissociation of carbon monoxide molecules on cobalt nanoparticles with sizes ranging from 4 to 15 nm. The majority of CO molecules adsorb molecularly on the surface of the nanoparticles, but some undergo dissociative adsorption, leading to oxide species on the surface of the nanoparticles. We found that the tendency of CO to undergo dissociation depends critically on the size of the Co nanoparticles. Indeed, CO molecules dissociate much more efficiently on the larger nanoparticles (15 nm) than on the smaller particles (4 nm). We further observed a strong increase in the dissociation rate of adsorbed CO upon exposure to hydrogen, clearly demonstrating that the CO dissociation on cobalt nanoparticles is assisted by hydrogen. Our results suggest that the ability of cobalt nanoparticles to dissociate hydrogen is the main parameter determining the reactivity of cobalt nanoparticles in Fischer-Tropsch synthesis.