Mining rare earth elements (REEs) can release large amounts of metal(loid)-rich dust, which can pose significant health risks to local residents. However, compared to other types of particulates, toxicity of mining dust has been largely overlooked. To provide experimental evidence on toxicity of REE mine dust, the study assessed the oxidative stress potential and genotoxicity of inhalable particles collected in a REE mining area, and associated toxicological response with source compositions. Both source types (i.e., mine and tailing area) and distances from source (i.e., industrial and residential areas) were considered when selecting the 44 sampling sites. The particle samples contained 2.3–3.5 folds higher concentrations of tested metal(loid)s than background concentrations in soil. Specially, elevated Fe, REEs, Cd, Pb were found. In spite of low cytotoxicity in lung epithelial A549 cells, there was increased cellular ROS production by of particle exposure. Samples with higher mining-originated source contributions (Provenance Index <0.3) had higher cellular ROS production (1.72 fold, 95%CI: 1.66–1.79 fold) than samples with lower mining contributions (1.58 fold, 95%CI: 1.52–1.65 fold). The factors soil (~46%), mine (~22%), and heavy metal (~20%) sources were recognized by source apportionment analysis as the main contributors to cellular ROS production; importantly, mine and heavy metal sources counted more in industrial samples. While samples generated genotoxicity, there were no differences in DNA damage between the location groups of sampling. Collectively, the results indicate that particles in mining areas may cause ROS production and DNA damage in lung cells depending on mine dust. Coupled with the long-range transportation potential of mine dust, safety measures on open pit and dust disposal sites should be adopted.