A series of Ce1-xFexO2-delta (0 <= x <= 0.4) catalysts were prepared by a co-precipitation method, and their catalytic activity towards CH4 combustion were investigated. The in situ Raman technology was used to identify the role of oxygen vacancy and the structure evolution of catalysts. The physicochemical characterizations suggest that pure Ce-Fe-O solid solution is formed for the samples with relatively low Fe content (x <= 0.3). When further increasing Fe content, free Fe2O3 nanoparticles are detected. The Ce0.6Fe0.4O2-delta catalyst displays the best activity due to the dominated role of free Fe2O3 nanoparticles. However, the Ce0.6Fe0.4O2-delta catalyst is more sensitive to the space velocity, and higher space velocity significantly reduces the activity, owing to the low concentration of oxygen vacancies. It is also found that the activity of Ce0.6Fe0.4O2-delta catalyst continuously decreases during the long-term testing due to the growth of surface Fe2O3 particles. The in situ Raman experiment suggests that the oxygen vacancy concentration decreases with reaction temperature. The comparison on the evolution of Raman spectra under different atmospheres indicates a possible reaction mechanism: the methane firstly adsorbs and reacts with the reducible species (e.g., free Fe2O3 clusters or surface oxygen species) on catalyst, and then the gas phase oxygen replenishes the defects (i.e., reduced iron species or oxygen vacancies) to close the redox process.