A $(β,δ,Δ)$-padded decomposition of an edge-weighted graph $G = (V,E,w)$ is a stochastic decomposition into clusters of diameter at most $Δ$ such that for every vertex $v\in V$, the probability that $\rm{ball}_G(v,γΔ)$ is entirely contained in the cluster containing $v$ is at least $e^{-βγ}$ for every $γ\in [0,δ]$. Padded decompositions have been studied for decades and have found numerous applications, including metric embedding, multicommodity flow-cut gap, multicut, and zero extension problems, to name a few. In these applications, parameter $β$, called the padding parameter, is the most important parameter since it decides either the distortion or the approximation ratios. For general graphs with $n$ vertices, $β= Θ(\log n)$. Klein, Plotkin, and Rao showed that $K_r$-minor-free graphs have padding parameter $β= O(r^3)$, which is a significant improvement over general graphs when $r$ is a constant. A long-standing conjecture is to construct a padded decomposition for $K_r$-minor-free graphs with padding parameter $β= O(\log r)$. Despite decades of research, the best-known result is $β= O(r)$, even for graphs with treewidth at most $r$. In this work, we make significant progress toward the aforementioned conjecture by showing that graphs with treewidth $\rm{tw}$ admit a padded decomposition with padding parameter $O(\log \rm{tw})$, which is tight. As corollaries, we obtain an exponential improvement in dependency on treewidth in a host of algorithmic applications: $O(\sqrt{ \log n \cdot \log(\rm{tw})})$ flow-cut gap, max flow-min multicut ratio of $O(\log(\rm{tw}))$, an $O(\log(\rm{tw}))$ approximation for the 0-extension problem, an $\ell^{O(\log n)}_\infty$ embedding with distortion $O(\log \rm{tw})$, and an $O(\log \rm{tw})$ bound for integrality gap for the uniform sparsest cut.