Indium oxide catalyzes acetylene hydrogenation with high selectivity to ethylene (>85%); even with a large excess of the alkene. In situ characterization reveals the formation of oxygen vacancies under reaction conditions, while an in depth theoretical analysis links the surface reduction with the creation of well-defined vacancies and surrounding In3O5 ensembles, which are considered responsible for this outstanding catalytic function. This behavior, which differs from that of other common reducible oxides, originates from the presence of four crystallographically inequivalent oxygen sites in the indium oxide surface. These resulting ensembles are 1) stable against deactivation, 2) homogeneously and densely distributed, and 3) spatially isolated and confined against transport; thereby broadening the scope of oxides in hydrogenation catalysis.