We report investigation on properties of multiwall carbon nanotubes (mCNTs) containing Ni residuals before and after encapsulation of zinc ferrite nanoparticles. The pristine tubes exhibit metallic character with a 0.3 eV reduction in the work function along with ferromagnetic behavior which is attributed to the Ni residuals incorporated during the preparation of tubes. Upon encapsulation of zinc ferrite nanoparticles, 0.5 eV shift in Fermi level position and a reduction in both the π band density of state along with a change in the hybridized sp2/sp3 ratio of the tubes from 2.04 to 1.39 are observed. As a result of the encapsulation, enhancement in the σ bands density of state and coating of the zinc ferrite nanoparticles by the internal layers of the CNTs in the direction along the tube axis is observed. Furthermore, Ni impurities inside the tubes are attracted to the encapsulated zinc ferrite nanoparticles, suggesting the possibility of using these particles as purifying agents for CNTs upon being synthesized using magnetic catalyst particles. Charge transfer from Ni/mCNTs to the ZnFe2O4 nanoparticles is evident via reduction of the density of states near the Fermi level and a 0.3 eV shift in the binding energy of C 1 s core level ionization. Furthermore, it is demonstrated that encapsulated zinc ferrite nanoparticles in mCNTs resulted in two interacting sub-systems featured by distinct blocking temperatures and enhanced magnetic properties; i.e., large coercivity of 501 Oe and saturation magnetization of 2.5 emu/g at 4 K.