Electroreduction of carbon dioxide (CO2) over copper-based catalysts provides an attractive approach for sustainable fuel production. While efforts are focused on developing catalytic materials, it is also critical to understand and control the microenvironment around catalytic sites, which can mediate the transport of reaction species and influence reaction pathways. Here, we show that a hydrophobic microenvironment can significantly enhance CO2 gas-diffusion electrolysis. For proof-of-concept, we use commercial copper nanoparticles and disperse hydrophobic polytetrafluoroethylene (PTFE) nanoparticles inside the catalyst layer. Consequently, the PTFE-added electrode achieves a greatly improved activity and Faradaic efficiency for CO2 reduction, with a partial current density >250 mA cm-2 and a single-pass conversion of 14% at moderate potentials, which are around twice that of a regular electrode without added PTFE. The improvement is attributed to a balanced gas/liquid microenvironment that reduces the diffusion layer thickness, accelerates CO2 mass transport, and increases CO2 local concentration for the electrolysis.