Rare earth elements have been widely utilized in material manufacturing to enhance properties in various ways. In order to obtain the WC-10Co4Cr coating with uniform distribution of rare earths, CeO2-modified powder was prepared by mixing 1 wt.% nano-sized CeO2 during the initial ball-milling of the powder fabrication process. Bare and CeO2-modified WC-10Co4Cr coatings were deposited via high velocity oxygen fuel spraying to investigate the impact of CeO2 modification on the coating’s microstructure, mechanical properties and abrasive wear performance. The results show that the addition of CeO2 increased the interface energy, inhibiting the formation of the Co3W3C phase during the powder sintering process, as well as the W2C phase and CoCr alloy during the high-velocity oxy-fuel (HVOF) process. This led to a significantly decreased porosity and higher concentration of undissolved Cr-rich areas. The microhardness and fracture toughness of the CeO2-modified coating were 1230 HV0.3 and 5.77 MPam1/2, respectively. The abrasive wear resistance of the CeO2-modified coating was only 70.9% of that of the unmodified coating. Due to the weak cohesive strength between WC and Cr, Cr-rich areas were preferentially removed, resulting in an increased wear rate in the CeO2-modified coating.