An investigation of the nature of adsorption of H₂O and CO₂ on a nitrogen doped zinc oxide cluster surface and the resultant reaction between them has been performed using hybrid density functional theory (DFT) calculations at the B3LYP level of theory in a vacuum. The stable chemisorption modes of CO₂ and H₂O on metal, oxygen and nitrogen sites were examined. The calculated adsorption energies reveal that the formation of CO₂⁻ attached to N is the most favorable process for CO₂ on the Zn₁₈O₁₇:N cluster surface, with a binding energy of −1.86 eV. The water molecule spontaneously dissociates on the same surface to produce chemisorbed H* and *OH with an interaction energy of −0.77 eV. The model calculations rationalize the hydrogenation of CO₂ by H₂ generated from H₂O on the cluster surface. Thermodynamically favorable reaction pathways for the formation of methanol on the catalytic surface in a vacuum were proposed. Among the three pathways, methanol formation follows the carbamate route. The carbamate formed undergoes hydrogenation to generate COOH* units, followed by its exothermic decomposition to *CO attached to N and *OH. Further hydrogenation of CO ultimately yields methanol. All of the above steps were computationally evaluated.