We report the direct synthesis of cerium oxide nanoparticles (CNPs) in polyethylene glycol (PEG) based solutions with efficient radical scavenging properties. Synthesis of CNPs in PEG demonstrated a concentration dependent (of PEG) redox activity characterized by UV-visible spectroscopy. PEGylated CNPs acted as efficient radical scavengers, and superoxide dismutase (SOD) activity of CNPs synthesized in various concentration of PEG did not reduce compared to bare nanoceria. In addition to superoxide, PEGylated nanoceria demonstrated quenching of peroxide radicals as welt. It was observed that the reaction with hydrogen peroxide leads to the formation of a charge transfer complex governed by the concentration of PEG. The stability of the charge transfer complex provides the tunable oxidation state of CNPs. The stability of this complex influences the regenerative capacity of the active 3+ oxidation state of CNPs. The cell viability as well as SOD activity of PEGylated CNPs is compared to those of bare CNPs, and the differences are outlined.