The 2,2'-bipyridine-3,3'-diol (BP(OH)(2)) molecule shows unique spectroscopic features in water that may position it as a new biological probe. In an attempt to mimic biological environments, we explore in this paper the caging effects of cyclodextrins on the steady state spectra of BP(OH)(2). The caging effects of gamma-,beta-, and 2,6- di-O-methyl-beta-cyclodextrins (CDs) on the ground and excited state properties of BP(OH)(2) in aqueous solutions are investigated by steady state absorption and fluorescence spectroscopy, and by ab initio calculations. The stoichiometry of the three complexes was found to be 1: 1 and the binding constants were estimated from the absorption and fluorescence spectra. In the case of gamma-CD, the large cavity size supports only small binding, whereas such binding increases in the cases of the smaller cavity sizes of beta-CD and 2,6-di-O-methyl-beta-CD. Maximum binding was measured in the case of 2,6-di-O-methyl-beta-CD due to the increased hydrophobicity of the host cavity. The unique absorption features of BP( OH) 2 in water show a dramatic decrease in intensity due to caging effects. The decrease in intensity correlates very well with the extent of binding and hydrophobicity of the host molecules. Similar results were also obtained from the fluorescence spectra. The calculated structure of the BP(OH)(2):B-CD complex predicts that the inclusion of BP(OH)(2) is nearly axial and centered inside the beta-CD cavity. The BP(OH)(2) molecule maintains its dienol moiety in the complex with no possible hydrogen bonding with the host interior H-atoms. The results are discussed in light of the possible use of BP(OH)(2) as a water sensor in biological systems.