Cerium oxide nanoparticles have been widely used for various applications such as catalytic converters for automobile exhaust, ultraviolet absorber, and electrolyte in fuel cells. Most recently, cerium oxide nanoparticles (nanoceria) have been employed as potent free-radical scavengers with neuroprotective, radioprotective, and anti-inflammatory properties. These properties of cerium oxide nanoparticles can open new vistas in medicine and biotechnology. The present study utilizes the water-based-wet-chemical method to synthesize biocompatible,stable and highly monodisperse polymer coated cerium oxide nanoparticles. Polymer coated cerium oxide nanoparticles possess all the characteristics of the uncoated cerium oxide nanoparticles. These nanoparticles were found to be effective as pH-dependent antioxidant giving cytoprotection to normal cell lines against hydrogen peroxide and nitric oxide radical but not to cancer cells. Moreover, cerium oxide nanoparticle also exhibits unique oxidase-like activity at acidic pH oxidizing a series of organic compound without the need of hydrogen peroxide. Based on these results, we have designed an immunoassay in which folate-conjugated cerium oxide nanoparticles provide dual functionality by binding to folate expressing cancer cells and facilitating detection by catalytic oxidation of sensitive colorimetric substrates (dyes). Finally, we have shown that the polymer coated cerium oxide nanoparticles shows distinct toxicity depending upon their subcellular localization based on uptake studies using DiI loaded cerium oxide nanoparticles. In these results, we have found that cerium oxide nanoparticles entrapped into lysosomes are more toxic as opposed to when they are localized in the cytoplasm.Overall we propose that the polymer coated cerium oxide nanoparticles displays selective antioxidant property, oxidase-like activity, and cytotoxicity to biological systems depending upon its pH environment.