The influence of oxygen coverage on the surface chemistry of diiodomethane (CH2I2) on oxygen-covered Rh(111) has been investigated, using a combination of temperature programmed reaction and high resolution electron energy loss spectroscopies. Partial oxidation to formaldehyde is favored at high oxygen coverages, while nonselective dehydrogenation and methane formation are prevalent at low and total combustion at intermediate oxygen coverages. Oxygen influences the chemistry of diiodomethane on Rh(111) in four distinct ways : (1) stabilization of carbon-iodide bonds, (2) inhibition of carbon-hydrogen bond cleavage in adsorbed hydrocarbons, (3) scavenging and removing of surface hydrogen, and (4) direct addition to gaseous methylene fragments. At high oxygen coverages, CH2I2 dissociation is inhibited, so as to produce transient CH2 that reacts with surface oxygen to form formaldehyde prior to equilibration with the surface. Equilibration of methylene with the rhodium surface ultimately leads to dehydrogenation and subsequent CO and CO2 formation. Specifically, there is no evidence for oxygen insertion into the Rh-CH2 bond.