The reaction mechanism for electrocatalytic reduction of CO₂ to formate by water-stable iridium dihydride pincer complex is studied using density functional theory (DFT). The reaction pathways are investigated in detail. The results suggest that the reaction proceeds in three steps: insertion of carbon dioxide into the Ir(III) pincer dihydride, elimination of formate ligand from the hydridoformatoiridium complex, and catalyst regeneration. The reduction potential of the electrode reaction is calculated and accords well with the experimental value. The solvent effect of MeCN and water on the reaction is explored. The results indicate that water has an important effect on CO₂ transforming to HCOO⁻. In addition, it also plays a critical role for regeneration of the catalyst via non-classical intermolecular hydrogen bonding.