The physical and chemical properties of bulk Ce1-xTbxO2 and Ce1-xTbxOy nanoparticles (xless than or equal to0.5) were investigated using synchrotron-based x-ray diffraction (XRD), x-ray adsorption near edge spectroscopy (XANES), Raman spectroscopy (RS), and first-principles density-functional (DF) calculations. DF results and Raman spectra point to a small tetragonal distortion after introducing terbium in ceria. The results of XRD show a small contraction (less than or equal to 0.08 A) in the cell dimensions. The presence of Tb generates strain in the lattice through the variation of the ionic radii and creation of crystal imperfections and O vacancies. The strain increases with the content of Tb and affects the chemical reactivity of the Ce1-xTbxOy nanoparticles towards hydrogen, SO2, and NO2. DF calculations for bulk Ce1-xTbxO2 and Ce8-nTbnO16 (n=0, 1, 2, or 4) clusters show oxide systems that are not fully ionic. The theoretical results and XANES spectra indicate that neither a Ce<---->Tb exchange nor the introduction of oxygen vacancies in Ce1-xTbxOy significantly affect the charge on the Ce cations. In contrast, the O K-edge and Tb L-III-edge XANES spectra for Ce1-xTbxOy nanoparticles show substantial changes with respect to the corresponding spectra of Ce and Tb single oxide references. The Ce0.5Tb0.5Oy compounds exhibit a much larger Tb3+/Tb4+ ratio than TbO1.7. A comparison with the properties of Ce1-xZrxOy and Ce1-xCaxOy shows important differences in the charge distribution, the magnitude of the dopant induced strain in the oxide lattice, and a superior behavior in the case of the Ce1-xTbxOy systems. The Tb-containing oxides combine stability at high temperature against phase segregation and a reasonable concentration of O vacancies, making them attractive for chemical and catalytic applications. (C) 2004 American Institute of Physics.