As a significant equipment in power system, the operation condition of transformers directly determines the safety of power system. Therefore, it has been an indispensable measure to detect and analyze the dissolved gases in transformers, aiming to estimate the early potential faults in oil-insulated transformers. In this chapter, the adsorption processes between modified carbon nanotubes (CNTs) (CNTs-OH, Ni-CNTs) and dissolved gases in transformers oil including C 2 H 2 , C 2 H 4 , C 2 H 6 , CH 4 , CO, and H 2 have been simulated based on the first principle theory. Meanwhile, the density of states (DOS), adsorption energy, charge transfer amount, and adsorption distance of adsorption process between CNTs and dissolved gases were calculated. Moreover, two kinds of sensors, mixed acid-modified CNTs and NiCl 2 -modified CNTs, are prepared to conduct the dissolved gases response experiment. Then, the gas response mechanisms were investigated. Finally, the results between response experiment and theoretical calculation were compared, reflecting a good coherence with each other. The CNTs gas sensors possess a relatively high sensitivity and fine linearity, and could be employed in dissolved gas analysis equipment in transformer.