The paper discusses the impact of functionalization on understanding the solubility of a single-walled carbon nanotube (SWCNT) to increase its dispersion in water, with the aide of spin-unrestricted density functional theory (DFT). A finite (10, 0) zigzag nanotube model containing 80 C atoms saturated with hydrogen at the ends was investigated with DFT. The (10, 0) SWCNTs were functionalized with: (a) carboxylic acid, (b) aromatic dicarboxylic acid and (c) aminotriethylene glycol, which can be derived from the carboxylic acid. The functionalization is thermodynamically stable and bonding is favorable. The results show an enhancement in the solubility of the nanotubes in water due to increased dipole moment as visualized in the HOMO–LUMO surface plots. Further as the degree of sidewall functionalization increases, the SWCNT sample becomes more soluble as assessed by the calculated Gibbs free energies of solvation.