In this study, hydrothermal carbonization (HTC) was applied for surface functionalization of carbon nanotubes (CNTs) in the presence of glucose and urea. The HTC process allowed the deposition of thin nitrogen-doped carbon layers on the surface of the CNTs. By controlling the ratio of glucose to urea, nitrogen contents of up to 1.7 wt% were achieved. The nitrogen-doped carbon nanotube-supported Pd catalysts exhibited superior electrochemical activity for ethanol oxidation relative to the pristine CNTs. Importantly, a 1.5-fold increase in the specific activity was observed for the Pd/HTC-N1.67%CNTs relative to the catalyst without nitrogen doping (Pd/HTC-CNTs). Further experiments indicated that the introduction of nitrogen species on the surface of the CNTs improved the Pd(0) loading and increased the binding energy.