Facile C-C bond formation is essential to the formation of long hydrocarbon chains in Fischer-Tropsch synthesis. Various chain growth mechanisms have been proposed previously, but spectroscopic identification of surface intermediates involved in C-C bond formation is scarce. We here show that the high CO coverage typical of Fischer-Tropsch synthesis affects the reaction pathways of C2Hx adsorbates on a Co(0001) model catalyst and promote C-C bond formation. In-situ high resolution x-ray photoelectron spectroscopy shows that a high CO coverage promotes transformation of C2Hx adsorbates into the ethylidyne form, which subsequently dimerizes to 2-butyne. The observed reaction sequence provides a mechanistic explanation for CO-induced ethylene dimerization on supported cobalt catalysts. For Fischer-Tropsch synthesis we propose that C-C bond formation on the close-packed terraces of a cobalt nanoparticle occurs via methylidyne (CH) insertion into long chain alkylidyne intermediates, the latter being stabilized by the high surface coverage under reaction conditions.