We have studied the effect of Ce on the phase formation behavior, surface morphology and electrical properties of sol-gel derived PZT thin films. Ce doping has been found to have a dramatic influence on the surface morphology and electrical characteristics of PZT thin films. Up to 1 at.% doping content Ce is found to improve the dielectric and ferroelectric properties and also optimal Ce doping is found to be effective in reducing the leakage current density and increasing the dielectric breakdown strength of PZT thin films. The fractional site occupancy of Ce ion has been predicted theoretically and the validity of the prediction has been investigated by XPS analysis. We have observed that Ce ions can exist both in +3 and +4 valence states. Up to 1 at.% content Ce predominantly enters into the A site with +3 valence state and acts as a donor dopant. The observed variation in microstructure and electrical properties have been discussed to be due to the fractional site occupancy of Ce ion either in A or B site, as a function of Ce doping content in PZT thin films.