Oxygen carrier (OC) development is an important topic in chemical looping combustion (CLC). Bimetal oxide OCs usually impart better performance than monometal oxide OCs; one example of which is the introduction of CeO2 as a partially reducible material capable of generating oxygen vacancies that lead to faster oxygen transfer inside OC particle. In this study, CeO2 was used as an additive to a Fe2O3-based OC and its effect on physical properties, such as morphology, surface area and crushing strength, was analyzed in detail. The reactivity of OCs during reduction and oxidation was studied using thermogravimetric analysis mass spectrometry and a bench scale CLC setup. The results showed that the reduction reaction at the OC surface was independent of whether CeO2 was present or not, but after the surface oxygen had been consumed during the oxidation of fuel, the OC with CeO2 additive provided faster oxygen transfer rates from the bulk to the surface to produce better average reaction rates. The OCs after reduction and oxidation cycles were characterized by using X-ray diffraction and Raman scattering techniques. The promotional role of the CeO2 additive is postulated that it enables the creation of oxygen vacancies in a solid solution. These vacancies were able to transfer oxygen from Fe2O3 quickly to the surface of the OC by vacancy diffusion or even through an oxygen tunnel formed by vacancies. The formation of a CeO2 and Fe2O3 solid solution provides the prerequisite for these short-range interactions.