Room temperature ferromagnetism in polycrystallineCoxCe1−xO2−δ (0.001≤x≤0.10) bulksamples has been investigated. Annealing in the forming gas transformed the as-prepared paramagneticinto a ferromagnetic insulating material with over two orders of magnitude enhancement (from3.7 × 10−2 to1.24 μB/Co) in the magnetization. Structural characterization of both the as-prepared andH2-treated samples showed a single phase material. The incorporation of Co with the formation ofoxygen vacancies in the oxide lattice was revealed by x-ray photoelectron spectroscopy (XPS).The presence of oxygen vacancies is indicated by the existence of mixed valence states of cerium(Ce4+ and Ce3+) in the high resolution XPS 3d spectrum. The role of the donor defects (oxygen vacancies)has been verified through the removal of oxygen vacancies. The ferromagneticinsulating ground state has been explained in terms of the interaction of theF+ center and 3d magnetic cations. The connection between magnetic properties, electronicstructure of the magnetic impurity and donor defect has been established. First principlecalculations have been performed using the full potential linearized augmented plane wavemethod within the density functional theory (DFT) framework; these support ourexperimental findings. Both the experiment and calculations reinforced the crucial role ofoxygen vacancies.