Surface functionalization of multiwall carbon nanotubes (MWCNTs) was carried out by introducing a ylide group containing anchored phenol structures. Epoxy nanocomposites filled with modified and pristine carbon nanotubes were prepared, and their mechanical, electrical, and thermal properties were evaluated. Mechanical properties such as tensile strengths and Young's moduli of the epoxy nanocomposites increased significantly with the addition of the modified MWCNTs compared to the pristine MWCNTs, due to the strong interaction between the modified MWCNTs and the epoxy matrix. Scanning electron microscopy of the fractured epoxy systems revealed that the functionalized MWCNTs were finely dispersed in the matrix, as opposed to the pristine carbon nanotubes. The epoxy/functionalized MWCNT nanocomposite had a lower surface electrical resistance than the epoxy/pristine MWCNT nanocomposite, confirming the effect of functionalization.