A series of Fe2O3-CeO2 composite catalysts were synthesized by coprecipitation and characterized by X-ray diffraction (XRD), BET surface area measurement, Raman spectroscopy, and X-ray photoelectron spectroscopy (XPS). Their catalytic activities in CO oxidation were also tested. The Fe2O3-CeO2 composites with an Fe molar percentage below 0.3 form solid solutions with the CeO2 cubic fluorite structure, in which the doped Fe3+ initially substitutes Ce4+ in fluorite cubic CeO2, but then mostly locate in the interstitial sites after a critical concentration of doped Fe3+. With an Fe molar percentage between 0.3 and 0.95, the Fe2O3-CeO2 composites are mixed oxides of the cubic fluorite CeO2 solid solution and the hematite Fe2O3. XPS results indicate that CeO2 is enriched in the surface region of Fe2O3-CeO2 composites. The Fe2O3-CeO2 composites have much higher catalytic activities in CO oxidation than the individual pure CeO2 and Fe2O3, and the Fe0.1Ce0.9 composite shows the best catalytic performance. The structure-activity relation of the Fe2O3-CeO2 composites in CO oxidation is discussed in terms of the formation of solid solution and surface oxygen vacancies. Our results demonstrate a proportional relation between the catalytic activity of cubic CeO2-like solid solutions and their density of oxygen vacancies, which directly proves the formation of oxygen vacancies as the key step in CO oxidation over oxide catalysts.