CO₂ hydrogenation to chemicals and fuels has the potential to alleviate CO₂ emissions and displace fossil resources simultaneously via consecutive RWGS and FTS reactions, also known as CO₂-FTS. As Fe-based catalysts are active and selective for both reactions, their bifunctionality requires a delicate balance between the RWGS and FTS. In this work, we investigated the thermodynamic constraints of RWGS and CO₂-FTS, the influence of CO₂ conversion on selectivity and the influence of Fe nanoparticle size within the range of 4.7 to 10.3 nm. An inert carbon support was selected to rule out metal-support interaction and promoting effects of the support. Catalytic performance was evaluated at 300 °C, 11 bar, H₂/CO₂/Ar = 3/1/1, 600 to 72000 mL·g_cat^-1·h^-1. At a CO₂ conversion level below RWGS equilibrium conversion of 23 %, RWGS was found to be the primary and dominant reaction. No primary Sabatier reaction was observed. At higher CO₂ conversion till the CO₂-FTS threshold of 42 %, the secondary FTS reaction became dominant. Notably, a non-linear relation between CO₂ conversion and CO selectivity was discovered. Comparing two catalysts with identical 5 wt% Fe loading but different average Fe nanoparticle size (6.6 and 8.4 nm), the 8.4 nm Fe catalyst was at least two times more active than the 6.6 nm Fe catalyst. In situ Mössbauer spectroscopy suggested a positive correlation between particle size, carburization and selectivity towards long-chain hydrocarbons. For these potassium-promoted carbon-supported Fe-based catalysts, nanoparticles of at least 8 nm are required for the formation of Fe carbides and improved reactivity.