Taking the torsional motion of H2O2 inside a carbon nanotube as an example, the interaction between the encapsulated guest species and the carbon nanotube has been studied using the density functional theoretical method with the B3LYP functional and the 6-31G** basis set. Depending upon its orientation inside the nanotube, H2O2 binds differently with the nanotube thereby inhibiting the torsional motion in the encapsulated state. The binding of the guest species with the nanotube due to the weak O-H center dot center dot center dot pi interaction is discussed. The polarization of the nanotube because of the guest species suggests that the molecular motion through the nanotube may be influenced by polar solvents and external electric fields. (C) 2009 Elsevier B.V. All rights reserved.