Carbon-encapsulated copper nanoparticles were synthesized by a carbon arc discharge method. The particles were characterized in detail by transmission electron microscope, high-resolution transmission electron microscopy, thermogravimetric and differential scanning calorimetry. The result showed that the outside graphitic carbon layers effectively prevented unwanted oxidation of the copper inside. The dispersion behaviors and thermal conductivity of Carbon-encapsulated copper nanoparticles in water with different dispersants were investigated under different pH values. The results showed that the dispersion and thermal conductivity enhancements of Carbon-encapsulated copper nanoparticles nanofluids are higher than that of copper nanoparticles.