Betulin, a natural compound extractable from the outer bark of birch, can be used to improve the properties of cellulosic textile fibres. Herein, oxidation was performed to prepare carboxyl-functionalized cellulose, which was subsequently covalently attached by betulin through esterification. The surface-modified cellulosic textile fibres showed a substantially improved hydrophobicity, as indicated by a water contact angle of 136°. Moreover, the material showed excellent antibacterial properties, as indicated by over 99% bacterial removal and growth inhibition, in both Gram-positive and Gram-negative bacterial assays. The method of surface-modification of the cellulosic materials adapted in this study is simple and, to the best of our knowledge, has not been carried out before. The results of this study prove that betulin, a side-stream product produced by forest industry, could be used in value-added applications, such as for preparing functional materials. Additionally, this modification route can be envisaged to be applied to other cellulose sources (e.g., microfibrillated cellulose) to achieve the goal of functionalization.