The physical and chemical properties of bulk Ce(1-x)Tb(x)O(2) and Ce(1-x)Tb(x)O(y) nanoparticles (x<or =0.5) 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 (< or = 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 Ce(1-x)Tb(x)O(y) nanoparticles towards hydrogen, SO(2), and NO(2). DF calculations for bulk Ce(1-x)Tb(x)O(2) and Ce(8-n)Tb(n)O(16) (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 Ce(1-x)Tb(x)O(y) significantly affect the charge on the Ce cations. In contrast, the O K-edge and Tb L(III)-edge XANES spectra for Ce(1-x)Tb(x)O(y) nanoparticles show substantial changes with respect to the corresponding spectra of Ce and Tb single oxide references. The Ce(0.5)Tb(0.5)O(y) compounds exhibit a much larger Tb(3+)/Tb(4+) ratio than TbO(1.7). A comparison with the properties of Ce(1-x)Zr(x)O(y) and Ce(1-x)Ca(x)O(y) 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 Ce(1-x)Tb(x)O(y) 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.