The formation pathway to double-walled carbon nanotubes (DWNTs) from C60 encased within single-walled carbon nanotubes (peapods) is introduced in this article. Onedimensionally arranged C60 molecules coalesce gradually within the nanotube and change the structure to C60 dimers, trimers, tetramers, and so on as intermediates. In addition to these interesting structural transformations visualized in the nanotube space, the nanotube itself is very stable, and this structural stability is very important when using the interior of the nanotube as the reaction field or the space for molecular storage. In terms of optical absorption, the lowest energy absorption band for DWNTs, ∼0.65 eV, shows broadened and downshifted features as compared with that of SWNTs.We expect that this opticalabsorption feature will lead to the use of DWNTs in absorbing devices for optical-fiber communications. The Raman experiments give new information about the frequency of the C-C stretching-mode vibration for nanotubes with diameters of less than ∼1 nm, which shows a decrease in vibration frequency with decreasing tube diameter. This diameter dependence can be explained by an admixture of sp3 character in the C-C interaction. Therefore, the electronic and mechanical properties of nanotubes with diameters of <1 nm are expected to be different from nanotubes of the ∼1-nm-diameter class, and we anticipate that new phenomena will occur in small-diameter tubes.