Cerium oxide nanoparticles (n-CeO2) have wide applications ranging from industrial to consumer products, which would inevitably lead to their release into the environment. Despite the toxicity of n-CeO2 on aquatic organisms has been largely reported, research on developing organisms is still lacking. In this study, we investigate the toxic effects of n-CeO2 on the stem cells, tissue- and neuro-regeneration, using freshwater planarian Dugesia japonica as a model. Effects of bulk sized (μ-) CeO2 and ionic Ce (Ce3+) were compared with that of n-CeO2 to explore the origin of the toxic effects of n-CeO2. No overt toxicity was observed in μ-CeO2 treatment. n-CeO2 not only impaired the homeostasis of normal planarians, but also inhibited the regeneration processes of regenerated planarians, demonstrated by the inhibited blastema growth, disturbed antioxidant defense system at molecular levels, elevated DNA-damage and decreased stem cell proliferation. Regenerating organisms are more susceptible to n-CeO2 than the normal ones. Ce3+ exhibited significantly higher toxicity than n-CeO2, even though the total Ce uptake is 0.2 % less in Ce3+ than in n-CeO2 treated in planarian. X-ray absorption near edge spectroscopy (XANES) analysis revealed that 12.8 % of n-CeO2 (5.95 mg/kg Ce per planarian) was transformed to Ce3+ after interaction with planarian, suggesting that biotransformation at the nano-bio interface might play an important role in the observed toxicity. Since the biotransformation of n-CeO2 is a slow process, it may cause long-term chronic toxicity to planarians due to the slow while sustained release of toxic Ce3+ ions.