Strong interfacial bonding and homogenous dispersion have been found to be necessary conditions to take full advantage of the extraordinary properties of nanotubes for reinforcement of composites. We have developed a fully integrated nanotube composite material through the use of functionalized single-walled carbon nanotubes (SWNTs). The functionalization was performed via the reaction of terminal diamines with alkylcarboxyl groups attached to the SWNTs in the course of a dicarboxylic acid acyl peroxide treatment. Nanotube-reinforced epoxy polymer composites were prepared by dissolving the functionalized SWNTs in organic solvent followed by mixing with epoxy resin and curing agent. In this hybrid material system, nanotubes are covalently integrated into the epoxy matrix and become part of the crosslinked structure rather than just a separate component. Results demonstrated dramatic enhancement in the mechanical properties of an epoxy polymer material, for example, 30-70% increase in ultimate strength and modulus with the addition of only small quantities (1-4 wt.-%) of functionalized SWNTs. The nano tube-reinforced epoxy composites also exhibited an increased strain to failure, which suggests higher toughness.