A correlation between the particle size and the lattice parameter has been established in cerium oxide nanoparticles. The variation in the lattice parameter is attributed to the lattice strain induced by the introduction of Ce3+ due to the formation of oxygen vacancies. Lattice strain was observed to decrease with an increase in the particle size. The Ce4+ to Ce3+ ratio in CeO2 nanoparticles increases with increasing the calcination temperature in air atmosphere. Such anomalous behavior is due to the physical effect of nanoparticle sizes on increasing the oxidation state of Ce ions in CeO2.