Density functional theory (DFT) calculations are performed to investigate the interactions of small Au-n (n = 1-5) clusters with single-walled carbon nanotubes (CNTs) and H-2 dissociation on the CNT supported clusters. Encapsulated Au clusters interact more strongly with the metallic CNTs than with the semi-conducting ones, where charge transfers from CNTs to the clusters play an important role. The clusters deposited outside the CNT are more stable than the ones encapsulated inside the tubes except for Au-1 and Au-3 on CNT(6, 6). Generally H-2 dissociation becomes more favorable thermodynamically, especially on the encapsulated clusters. Except for Au monomer, H-2 dissociation on the encapsulated clusters is kinetically more difficult than on the outside deposited clusters. Compared with the situation on bare clusters, H2 dissociation needs to overcome higher barriers on CNT supported clusters, apart from that on Au monomer on the outer surface of the CNTs and on the encapsulated Au dimer. These kinetic results demonstrate that confinement effect is not helpful for all reactions and CNT supported catalysts do not improve the activity for all reactions. (c) 2010 Elsevier B.V. All rights reserved.