Cancer remains a leading global cause of mortality, highlighting the critical need for effective early diagnosis. Despite advancements in treatment, early detection and imaging continue to pose significant challenges. Functionalized carbon nanotubes (CNTs) have emerged as promising nanomaterials due to their unique structural properties and versatile functionalization strategies. This review explores the role of both covalent (e.g., fluorination, hydrogenation, cycloadditions, aryldiazonium salt reduction, organometallic ion attachment, carboxylation, amidation, esterification, and metallic nanoparticle attachments) and non-covalent functionalization methods (e.g., surfactant coating, polymer wrapping, biomolecule attachment, and polymer encapsulation) in enhancing CNT biocompatibility and diagnostic efficiency. Functionalized CNTs are extensively applied in cancer detection through highly sensitive biosensors, including electrochemical, optical, and field-effect transistor-based systems, capable of detecting various cancer biomarkers with exceptional sensitivity. Additionally, they offer significant advantages in cancer imaging modalities such as fluorescence imaging, magnetic resonance imaging (MRI), computed tomography (CT), and ultrasound imaging, improving contrast, resolution, and specificity. This review also discusses the challenges and future directions in the development of CNT-based diagnostic platforms, emphasizing the need for continued research to advance their clinical translation and integration into routine cancer diagnostics.