Ceria nanoparticles were synthesized by hydrolysis of cerium nitrate in basic medium. The cubic fluorite structure of ceria was confirmed by XRD. From TEM studies ceria nanoparticles were found to be spherical in shape with an average diameter of 5 nm. The prepared nanoparticles have a predominant orientation along (2 2 2) crystallographic plane. Oxygen vacancies and Ce3+ lead to the lattice expansion and strain in CeO2. Peak asymmetry and broadening of Raman active mode peak further confirms the presence of these defects. Total concentration of oxygen vacancies that are present in the ceria nanocrystallites is calculated to be 1.234 x 10(20) cm(-3). These oxygen vacancies and ceria related defects result in an effective red shifting of the band gap by changing its structural regularity. The visible luminescence peaks are also caused by these Ce3+ and oxygen vacancy centers. (C) 2011 Elsevier B.V. All rights reserved.