Cerium oxide is a low-value byproduct of rare-earth mining yet constitutes the largest fraction of the rare earth elements. The reduction of cerium oxide by liquid aluminum is proposed as an energy- and cost-efficient route to produce high-strength Al-Ce alloys. This work investigated the mechanism of a multi-step reduction reaction to facilitate the industrial adaptation of the process. Differential scanning calorimetry in combination with time-resolved synchrotron diffraction data uncovered the rate-limiting reaction step as the origin of the reported temperature dependence of reduction efficiency. This is the first in situ study of a metallothermic reaction mechanism and will serve as guidance for cost- and energy efficient industrial process control.