We investigated the NO gas sensing characteristics of ZnO-carbon nanotube (ZnO-CNT) layered composites fabricated by coaxial coating of single-walled CNTs with a thin layer of 1 wt% Al-doped ZnO using rf magnetron sputtering deposition. Morphological studies clearly revealed that the ZnO appeared to form beadshaped crystalline nanoparticles with an average diameter as small as 30 nm, attaching to the surface of the nanotubes. It was found that the NO gas sensing properties of the ZnO-CNT layered composites were dramatically improved over Al-doped ZnO thin films. It is reasoned from these observations that an increase in the surface-to-volume ratio associated with the numerous ZnO “nanobeads” on the surface of the CNTs results in the enhancement of the NO gas sensing properties. The ZnO-CNT layered composite sensors exhibited a maximum sensitivity of 13.7 to 2 ppm NO gas at a temperature of 200${^{circ}C}$ and a low NO gas detection limit of 0.2 ppm in dry air.