Steel casing pipes used in the construction of deep oil wells usually require both high strength and corrosion-resistant behavior. Due to the exploration of deep H2S-bearing oil reservoirs, sulfide stress cracking (SSC) is becoming an increasingly serious concern for casing steel. The nonmetallic inclusions in the steel are among the key reasons for its service failure. The rare earth element Ce can be used to modify the inclusions in casing steel and improve its SSC resistance. Here, taking C110 grade casing steel (the highest class currently in service) as the investigated object, the modification behavior of Ce inclusions in the steel and the effect of the addition of Ce in varying amounts (0.01, 0.024, and 0.042 wt.%) on the modified products were studied through high-temperature tube furnace experiments and thermodynamic calculations. The results showed that Ce had an obvious modification effect on the CaO·Al2O3 inclusions in casing steel, and the diffusion of dissolved Ce in the steel was the limiting step of the modification reaction. With the extension of reaction time, the sequence describing the modification of inclusions in the steel was determined as follows: CaO·Al2O3 → CeAlO3 → Ce2O3/Ce2O2S. The final stable product after modification depended on the amount of Ce added. With 0.01 wt.% Ce, the stable phase in molten steel was Ce2O3; on the other hand, upon adding ≥0.024 wt.% Ce, the stable phase became Ce2O2S. In addition, the thermodynamic stability of Ce2O3 decreased, and it was transformed into CeAlO3, Ce2O2S, Ce2S3, and CeS during solidification. On the basis of our results and the considerations for smooth casting, the addition of a proper amount of a rare earth element is suggested for industrial trials, following the achievement of a significant and surprising improvement in the qualified rate of SSC resistance for the final steel products. The relevant mechanism is also analyzed.