The reductive decomposition of calcium sulfate (CaSO4) to calcium sulfide (CaS) was one of the most important methods for anhydrite resource utilization. When CaSO4 was decomposed reductively by carbon monoxide (CO), usually there were CaS and/or calcium oxide (CaO) in the decomposition products of CaSO4 depending on the reaction temperature and reactant concentrations. In this paper, the mechanism of CaSO4 reductive decomposition by CO was studied in the framework of density functional theory (DFT). In the calculation, the exchange-correlation term was approximated by Perdew-Wang (PW91), a functional within the generalized gradient approximation (GGA) family. To study the interaction of CO and CaSO4, the transition states of CaSO4 decomposition and the minimum energy path (MEP) were analyzed. The results showed that the CaS product could be obtained when CaSO4 was reduced by CO with the 4:1 stoichiometric ratio of CO and CaSO4, and the decomposition of CaSO4 to CaSO3 was the rate-determining step, and activation energy in this step was 191.19 kJ/mol. With the increase of the reaction temperature, the CaO product could be obtained with a 1:1 stoichiometric ratio of CO and CaSO4, and the activation energy is 318.28 kJ/mol during the process. It was found that the CaS product was formatted at a lower reaction temperature and a higher mole ratio of CO and CaSO4, and the CaO product was preferred at a higher reaction temperature and a lower mole ratio of CO and CaSO4.