Processing of nanoparticles is a core research area of nanotechnology. Carbon nanotubes (CNTs) are a prototype high aspect ratio nanomaterial and have been extensively studied due to their remarkable properties and the wide range of potential applications. Ultrasonication is the most widely used technique for the dispersion of a range of nanomaterials but the underlying mechanism is poorly understood, with the role of acoustic cavitation largely ignored by the materials science community despite its critical role in the dispersion process. As a consequence, many of the dispersion strategies in the literature are empirical in nature and typically specify only the solute concentrations, the electrical input power of the device and the exposure time. Having as an aim the need to clarify, standardise and optimise these processes, this thesis presents new insights into the dispersion mechanism of CNTs in aqueous surfactant solutions using a novel sono-reactor and an in situ technique for the measurement of acoustic cavitation activity during sono-processing. Distinction is made between stable cavitation, which leads to chemical attack on the surface of the CNTs, and inertial cavitation, which favours CNT exfoliation and length reduction. These main conclusions are supported by a range of characterisation techniques, including measurement of sonochemically generated hydrogen peroxide, characterisation of CNT quality using Raman spectroscopy and of dispersion efficiency using absorption spectroscopy and atomic force microscopy. This work highlights that careful measurement and control of cavitation rather than blind application of input power is essential in the production of nanomaterial dispersions with tailored properties. The results have major implications for enhanced control and scale-up of nanoparticle dispersion using ultrasonic processing.