Functionalization of carbon nanomaterials is often a critical step that facilitates their integration into larger material systems and devices. In the as-received form, carbon nanomaterials, such as carbon nanotubes (CNTs) or graphene nanoplatelets (GNPs), may contain large agglomerates. Both agglomerates and impurities will diminish the benefits of the unique electrical and mechanical properties offered when CNTs or GNPs are incorporated into polymers or composite material systems. Whilst a variety of methods exist to functionalize carbon nanomaterials and to create stable dispersions, many the processes use harsh chemicals, organic solvents, or surfactants, which are environmentally unfriendly and may increase the processing burden when isolating the nanomaterials for subsequent use. The current research details the use of an alternative, environmentally friendly technique for functionalizing CNTs and GNPs. It produces stable, aqueous dispersions free of harmful chemicals. Both CNTs and GNPs can be added to water at concentrations up to 5 g/L and can be recirculated through a high-powered ultrasonic cell. The simultaneous injection of ozone into the cell progressively oxidizes the carbon nanomaterials, and the combined ultrasonication breaks down agglomerates and immediately exposes fresh material for functionalization. The prepared dispersions are ideally suited for the deposition of thin films onto solid substrates using electrophoretic deposition (EPD). CNTs and GNPs from the aqueous dispersions can be readily used to coat carbon- and glass-reinforcing fibers using EPD for the preparation of hierarchical composite materials.