Engineered nanomaterials (ENMs) are used to enhance the properties of many manufactured products and technologies. Increased use of ENMs will inevitably lead to their release into the environment. An important route of exposure is through the waste stream, where ENMs will enter wastewater treatment plants (WWTPs), undergo transformations, and be discharged with treated effluent or biosolids. To better understand the fate of a common ENM in WWTPs, experiments with laboratory-scale activated sludge reactors and pristine and citrate-functionalized CeO2 nanoparticles (NPs) were conducted. Greater than 90% of the CeO2 introduced was observed to associate with biosolids. This association was accompanied by reduction of the Ce(IV) NPs to Ce(III). After 5 weeks in the reactor, 44 ± 4% reduction was observed for the pristine NPs and 31 ± 3% for the citrate-functionalized NPs, illustrating surface functionality dependence. Thermodynamic arguments suggest that the likely Ce(III) phase generated would be Ce2S3. This study indicates that the majority of CeO2 NPs (>90% by mass) entering WWTPs will be associated with the solid phase, and a significant portion will be present as Ce(III). At maximum, 10% of the CeO2 will remain in the effluent and be discharged as a Ce(IV) phase, governed by cerianite (CeO2).