The potential application of ultrafine cerium oxide (ceria, CeO_2) as an oxygen gas sensor has been investigated. Ceria was synthesized by a thermochemical process: first, a precursor powder was prepared by spray drying cerium-nitrate solution. Heat treatment in air was then performed to evaporate the volatile components in the precursor, thereby forming nanostructured CeO_2 having a size of approximately 20 nm and specific surface area of 100 m2/g. After sintering with loosely compacted samples, hydrogen-reduction heat treatment was performed at 773K to increase the degree of non-stoichiometry, x, in CeO_2-x. In this manner, the electrical conductivity and oxygen-response ability could be enhanced by increasing the number of oxygen vacancies. After the hydrogen reduction at 773K, CeO_1.5 was obtained with nearly the same initial crystalline size and surface. The response time t_90 measured at room temperature was extremely short at 4 s as compared to 14 s for normally sintered CeO_2. We believe that this hydrogen-reduced ceria can perform capably as a high-performance oxygen sensor with good response abilities even at room temperature.