Nanospheres of pure CeO2 and Co-doped CeO2 (Ce1−xCoxO2, 0.01 ≤ x ≤ 0.07) dilute magnetic oxide were prepared by hydrothermal treatment using cerium (III) nitrate, cobalt (III) nitrate, and polyvinylpyrrolidone (PVP) as a surfactant. The prepared samples were studied using x-ray diffraction (XRD), transmission electron microscopy, field-emission scanning electron microscopy (FE-SEM), and UV-Visible spectroscopy. The valence states of Ce and Co ions were determined by using x-ray absorption near edge spectroscopy. The magnetic properties of the samples were studied using vibrating sample magnetometry. The results from XRD indicated that the synthesized samples had a cubic structure without a change in the structure of CeO2 due to Co substitution. FE-SEM micrographs showed that the samples had a spherical morphology. The Co-doped CeO2 showed a red shift of the band gap energy that originates from defects caused by Co substitution. The samples of both CeO2 and Co-doped CeO2 exhibit room temperature ferromagnetism, and the saturated magnetization (Ms) increases with increasing Co content until x = 0.03 and then displays ferromagnetic loops as well as paramagnetic behavior. Oxygen vacancies have been proposed to play an important role in the magnetic properties of Co-doped CeO2.