In this study, we established an integrated chemical/biological methodology for the complete poly(ethylene terephthalate) (PET) degradation and biopolyol production using cerium-iron oxide nanoparticles (CeFeNPs). Initially, three nanoparticles, i.e. CeNPs, FeNPs, and CeFeNPs were synthesized and evaluated for PET glycolysis. CeFeNPs demonstrated the best catalytic performance for PET depolymerization to bis(2-hydroxyethyl) terephthalate (BHET) and was further recovered from the PET depolymerized slurry to reutilize again. BHET was further biodegraded using hydrocarbonoclastic bacterium Pseudomonas aeruginosa PR3 under the batch modes using shake flask and stirred tank bioreactor. To elucidate the fate of BHET biodegradation under aerobic conditions, identification of various BHET degraded metabolites was carried out using liquid chromatography-mass spectrometry analysis. The strain could produce extracellular diol synthase enzyme which transforms oleic acid into the biopolyol, 7,10-dihydroxy-8(E)-octadecenoic acid (DOD). CeFeNPs were further supplemented to enhance DOD production via whole cell and cell-free approaches.