Carbon nanotubes can be used as promising reinforcement materials to improve the mechanical properties of hydrogels, but their poor dispersibility in aqueous solution severely limits their application in preparation of composite hydrogels. Therefore, to develop method for modification of carbon nanotubes is still highly desired. In this paper, a facile approach for preparation of the hydrophilic carbon nanotube was reported. The encapsulated multiwalled carbon nanotubes (E-CNT-PAA) with cross-linked shell structure were obatined through the self-assembly of the amphipathic azide diblock copolymers poly(acrylic acid)-b-poly(4-vinylbenzyl azide-costyrene) (PAA-b-(PVBA-co-PS)), and the cross-linking of inside azide groups under UV irradiation. The encapsulated MWCNT was characterized by FT-IR, Raman and TEM. It was demonstrated that the dispersibility of the hydrophilic encapsulated MWCNTs was related to the length of the poly(acrylic acid) brushes. Subsequently, thermal-responsive composite hydrogels (PNIPAM/E-CNT-PAA) were prepared by in situ polymerization of N-isopropylacrylamide (NIPAM) in the solution of dispersed E-CNT-PAA. The results showed that the composite hydrogels possessed high mechanical properties compared to the pure PNIPAM hydrogel. The tensile strength and elongation of the composite hydrogels were highly dependent on the content of the modified MWCNTs. The composite hydrogels with 0.46 wt % MWCNTs exhibited tensile strength of 97.7 kPa and elongation of 465%, which were at least 3.SX higher than those of the PNIPAM hydrogel. Moreover, the composite hydrogels displayed significant and reversible stimuli-responsiveness.