Moderate or intense low-oxygen dilution (MILD) combustion is a promising technology for energy savings and pollutants emission reduction, and it has been experimentally shown that the MILD regime can be achieved more easily when using CO2 as diluent with respect to N2 [ Li P. ; Combust. Flame 2013, 160 (5), 933−946 ]. Since CO2 is different from N2 in both physical and chemical properties, the present study aims at distinguishing the physical and chemical effects of CO2 addition on the establishment of MILD combustion. A jet in hot coflow (JHC) burner firing CH4/H2 blended fuel is numerically modeled coupled with a detailed chemical kinetics mechanism. Following the examination of grid independency and model validation, the differences in combustion temperature, minor and major species formations as well as the CH4 oxidation pathway are compared by, respectively, replacing N2 with CO2 or X (artificial CO2) in low-oxygen coflow. An interesting phenomenon is presented that the chemical effects of CO2 play a comparable role in the suppression of temperature rise to the physical effects. However, with the replacement of N2 by CO2, the contribution of chemical effects to temperature reduction is gradually weakened. Moreover, the chemical effects of CO2 are responsible for the ignition delay as well as the enhanced CO emission when is CO2 replacing N2, which is due to the inhibition of CH4 oxidation through Routes I (CH4 → CH3 → CH2(S)/CH2 → (CH → CH2O →) HCO → CO → CO2) and II (CH4 → CH3 → CH2O → HCO → CO → CO2) together with the enhanced CO2 dissociation by R99 (OH + CO ↔ H + CO2) and R153 (CO2 + CH2(S) ↔ CO + CH2O).