Iron (Fe) substituted cerium oxide (Ce0.95Fe0.05O2) nanoparticles were synthesized by solid state reaction and annealed in vacuum at a pressure of 1 × 10−3 mbar at two different temperatures (473 K and 673 K). The annealed nanoparticles were characterized for structural, optical and magnetic properties and studied the role of annealing on these properties. From XRD studies it was observed that the crystallite size decreased from 27 nm to 23 nm and the lattice constant increased from 5.37 Å to 5.39 Å with increase of annealing temperature from 473 K to 673 K. From the optical studies, it was found that the optical band gap of the nanoparticle remains unchanged (3.32 eV). The magnetic properties confirmed that the nanoparticles were ferromagnetic and the strength of magnetization increased by annealing the nanoparticles at two temperatures. The un-annealed Ce0.95Fe0.05O2 nanoparticles exhibited a magnetic moment of 0.07 emu/g with coercive field of 491 Oe. But a significant change in magnetization was occurred when the Ce0.95Fe0.05O2 nanoparticles annealed at 673 K. The saturation magnetic moment and coercive field of 0.437 emu/g, 677 Oe were observed for Ce0.95Fe0.05O2 nanoparticles, when annealed at 673 K. The observed results were discussed in the manuscript. © 2019 Elsevier Ltd