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The hydrophilic nature of cellulose compromises the dielectric properties of kraft paper insulation when exposed to water and moisture. The effort to address this setback is an ongoing research enquiry. In the present work, surface-modified rutile-titanium dioxide nanoparticles (rutile-TiO2 NPs) are reinforced into cellulose pulp to fabricate a nanocomposite kraft paper insulation. Surface modification of the nanofiller particles is intended to reduce the hydrophilicity of the resultant nanocomposite kraft paper insulation. The nanoparticles (rutile-TiO2 NPs) improve other dielectric properties of the insulation. The chemicals used for the surface modification of the rutile-TiO2 NPs were the alkyl ketene dimer (AKD) and alkenyl succinic anhydride (ASA). The nanofiller retention, dispersion and hydrophobic properties of the resultant reinforced kraft paper were experimentally analyzed. The results show that more than 50% of the nanofillers were retained within the reinforced kraft paper and translated to 1.5% by weight loading of the nanoparticles in the kraft paper. Scanning electron microscopy (SEM) images showed evenly distributed nanofillers, with some traces of agglomeration. The moisture absorption property of the kraft paper specimen modified with rutile-TiO2 NPs surface conditioned with 5 vol/vol% ASA improved by 74% compared to the control (reference) specimen. Water vapor transmission rate of the surface-modified nanoparticles reinforced kraft paper insulation decreased by 30%. Compared to the unfilled paper, the contact angle of water droplets on the surface of the reinforced kraft paper improved by 12%. Water absorption rate improved by being 4 times slower in paper specimens containing rutile-TiO2 NPs surface conditioned with 5 vol/vol% ASA. Dielectric dissipation factor measurement results showed that the specimen modified with rutile-TiO2 NPs surface conditioned with 5 vol/vol% ASA had 40% lower dielectric losses than the reference samples. This study, therefore, has successfully improved the hydrophobic properties of kraft paper by filling it with surface-modified rutile TiO2 using 5% ASA as the nanoparticle surfactant.