Mercerized wood cellulose was oxidized by 4-acetamide-TEMPO/NaClO/NaClO2 system at 60 °C and pH 4.8 for 1–5 days. Mostly individual nanocrystals 4–7 nm in width and 100–200 nm in length were obtained by ultrasonication of the oxidized product in water. The nanocrystals had the cellulose II structure, and carboxylate contents of 2.0–2.4 mmol/g, indicating that these carboxylate groups were selectively formed on the cellulose II crystallite surfaces in mercerized cellulose. Moreover, the original wood cellulose and mercerized cellulose were acid-hydrolyzed, and then subjected to the TEMPO-mediated oxidation under the same conditions at pH 4.8 to prepare reference samples. TEM images, light transmittance and rheological properties of water dispersions showed that the nanocrystals prepared from mercerized cellulose by the TEMPO oxidation and sonication in water had the highest dispersibility of individual nanocrystals with less amounts of bundles in water, resulting from the highest carboxylate contents.