A gentle, rapid method has been developed to introduce a polyacrylic acid (PAA) polymer coating on the surface of gadonanotubes (GNTs) which significantly increases their dispersibility in water without the need of a surfactant. As a result, the polymer, with its many carboxylic acid groups, coats the surface of the GNTs to form a new GNT-polymer hybrid material (PAA-GNT) which can be highly dispersed in water (ca. 20 mg·mL−1) at physiological pH. When dispersed in water, the new PAA-GNT material is a powerful MRI contrast agent with an extremely short water proton spin-lattice relaxation time (T1) which results in a T1-weighted relaxivity of 150 mM−1·s−1 per Gd3+ ion at 1.5 T. Furthermore, the PAA-GNTs have been used to safely label porcine bone-marrow-derived mesenchymal stem cells for magnetic resonance imaging. The labeled cells display excellent image contrast in phantom imaging experiments, and transmission electron microscopy images of the labeled cells reveal the presence of highly dispersed PAA-GNTs within the cytoplasm with 1014 Gd3+ ions per cell.