Nanoparticles having a size smaller than 100 nm are important building blocks of nanomaterials. Organically functionalized CeO2 nanoparticles were prepared by colloidal synthesis in this work. The particles were nucleated by mixing aqueous solutions of Ce(NO3)3·6H2O and ammonia at room temperature. Different small organic molecules were chosen as capping agents and injected into the reaction medium at the beginning of the synthesis: 3- (mercaptopropyl) trimethoxy silane (MPS), hexadecyltrimethyl ammonium bromide (CTAB), 3-mercapto propionic acid (3-MPA), and thioglycolic acid (TGA). The resulting nanocrystals were quasi-spherical and has a narrow mean size distribution with an average size smaller than 10 nm. Polymerization of monomer/nanoparticle dispersion, namely in situ polymerization, has been frequently used for the fabrication of polymer nanocomposites. Both in situ and ex situ approaches were applied for surface functionalization. The particles were dispersed into methyl methacrylate and free radical polymerization was carried out. The process of nanocomposite formation was examined in terms of conversion, molecular weight, and molecular weight distribution. The polymerization responds merely to the in situ functionalized particles. Regardless of the capping agents used, the particles function as a retarder and inhibitor. Their interaction with polymerization medium shows many complexities such that molecular weight is found to be strongly dependent on the capping agent employed.