This article reports the results of studies on the effect of 1-octadecanol (abbreviated as C18) functionalization of carbon nanotubes (CNT) on electrical properties of natural rubber (NR) composites. Dispersion of CNT in NR matrix was studied by transmission electron microscopy (TEM) and electrical resistivity measurements. Fourier transform infra red spectrometry (FTIR) indicates characteristic peaks for ether and hydrocarbon in the case of C18 functionalized CNT. Dielectric constant increases with respect to the filler loading for both unmodified and functionalized CNTs, the effect being less pronounced in the case of functionalized CNT due to its better dispersion in the matrix. Stress-strain plots suggest that the mechanical integrity of the NR/CNT composites, measured in terms of tensile strength, increases on C18 functionalization of the nanofiller. TEM reveals that the functionalization causes improvement in dispersion of CNT in NR matrix, which is corroborated by the increase in electrical resistivity in the case of the functionalized CNT/NR composites.