Bulk 1T-TaSe₂ is metallic, yet its surface consistently exhibits an insulating gap – a dichotomy long attributed to a surface Mott insulator driven by enhanced electron correlations. Here, using density functional theory calculations, we show that this insulating surface instead originates from a charge-density-wave (CDW) stacking reconstruction. Whereas the bulk stabilizes a single-layer CDW stacking that supports metallic transport, the surface energetically favors a bilayer stacking, in which interlayer hybridization of Ta 5d_(z²) orbitals opens a ∼0.4 eV gap – a band insulator requiring no on-site Coulomb repulsion. This reconstruction is the thermodynamic ground state for slab thicknesses from two to eight layers, and the calculated surface density of states quantitatively reproduces scanning tunneling spectra for both insulating and metallic domains. Our results establish CDW surface reconstruction, rather than Mott physics, as the mechanism governing the surface electronic structure of 1T-TaSe₂ and provide a unified explanation for the experimentally observed coexistence of metallic and insulating domains.