In this study, we firstly report that hydrophilic graphite nanoparticles were successfully synthesized by liquid phase pulsed laser ablation method and the carbon-polymer composite sensor prepared with the nanoparticles showed a markedly enhanced gas sensing performance. The pulsed laser ablation of graphite rod in water generated well dispersed hydrophilic graphite nanoparticle and they showed an extremely high stability in water without any surfactant or stabilizer. FT-IR spectra showed that the hydrophilic functional groups such as carboxyl and carbonyl groups were simultaneously introduced onto the surface of graphite with the nanoparticle formation and the highly negative zeta potential due to the functional groups was the origin of the markedly high stability in water. Finally, the carbon-polymer composite sensor composed of hydrophilic graphite nanoparticles and polyvinylpyrrolidone (PVP) demonstrated an enhanced detection response in comparison with the commercial carbon black, and which was attributed to the introduced hydrophilic functional groups on graphite nanoparticle surfaces.