Ambient-pressure operando soft X-ray absorption spectroscopy (soft-XAS) was applied to study the reactivity of hydroxylated SnO2 nanoparticles toward reducing gases. H2 was first used as a test case, showing that the gas phase and surface states can be simultaneously probed: Soft-XAS at the O K-edge gains sensitivity toward the gas phase, while at the Sn M4,5-edges, tin surface states are explicitly probed. Results obtained by flowing hydrocarbons (CH4 and CH3CHCH2) unequivocally show that these gases react with surface hydroxyl groups to produce water without producing carbon oxides and release electrons that localize on Sn to eventually form SnO. The partially reduced SnO2 - x layer at the surface of SnO2 is readily reoxidized to SnO2 by treating the sample with O2 at mild temperatures (>200 °C), revealing the nature of "electron sponge" of tin oxide. The experiments, combined with DFT calculations, allowed devising of a mechanism for dissociative hydrocarbon adsorption on SnO2, involving direct reduction of Sn sites at the surface via cleavage of C-H bonds and the formation of methoxy- and/or methyl-tin species at the surface.