In this work, the multiwalled carbon nanotubes(MWNTs) were functionalized with sodium dodecylbenzene sulfonate(SDBS) and then MWNTs/Lyocell composite fibers were prepared. The properties of MWNTs, the functionlization on the surface of MWNTs and their dispersion in the cellulose matrix were characterized by TEM, SEM, WAXD and FT-IR. The results showed that SDBS has been coated successfully onto the surface of the MWNTs by functionlization. This can improve effectively the dispersion uniformity of MWNTs in NMMO aqueous solution and is helpful to prepare a spinnable spinning dope. Moreover, the resultant MWNTs/Lyocell composite fibers still have cellulose II crystal structure, and their tensile strength and initial modulus increased with the increasing draw ratio and reached the optimal value with adding 1 wt% MWNTs. The thermal stability of the composite fiber was also improved by the addition of the MWNTs.