A rapid thermal annealing process is demonstrated for healing the defects in carbon nanotubes using a DC vacuum arc discharge system. Multi-walled carbon nanotubes (MWCNTs) grown by chemical vapor deposition at a relatively low temperature (∼650 °C) showed structural imperfections inside the tubes which are known as "bamboo-like" defects. These defects can be thermally annealed to reconstruct the graphitic structure. A vacuum arc discharge system was used to generate high temperatures (∼1800 °C) followed by rapid cooling. The MWCNTs can be rapidly annealed in such a system by several heating and cooling cycles. The annealed samples were characterized by Raman spectroscopy and transmission electron microscopy. The defects were found to be healed when the environment contained water vapor, indicating that oxygen may play an important role in breaking the imperfect graphitic structure and removing the weakly bonded defects during the rapid heating cycles. After breaking the “bamboo” segment, the graphene shell was then reconstructed during the cooling process to produce multi-shell perfection. This method produces effective defect healing and bamboo structure removal from MWCNTs.