Polypyrrole-multiwall carbon nanotubes (PPy/MWCNT) nanocomposites were synthesised by in-situ chemical oxidative polymerisation method. The MWCNTs were functionalised prior to the formation of nanocomposites. These nanocomposites were characterised by field emission scanning electron microscopy (FESEM), X-ray diffraction (XRD), Fourier transform infrared (FTIR) spectroscopy and thermogravimetric analysis (TGA) to study the effect of incorporation of functionalised MWCNT in PPy matrix. The results showed the successful formation of PPy/MWCNT nanocomposite and there is significant interaction between PPy and MWCNTs. The response of the prepared PPy/ MWCNT nanocomposites sensors was studied in the form of sensitivity towards ethanol vapours. Results showed that the response increases with ethanol concentration and it is also affected by the MWCNT content in PPy matrix.