Abstract: The confinement of a C-60 molecule encapsulated in a cylindrical nanotube depends on the tube radius. In small tubes with radius R-T less than or similar to 7 A, a fivefold axis of the molecule coincides with the tube axis. The interaction between C-60 molecules in the nanotube is then described by a O-2-rotor model on a 1D liquid chain with coupling between orientational and displacive correlations. This coupling leads to chain contraction. The structure factor of the 1D liquid is derived. In tubes with a larger radius the molecular centers of mass are displaced off the tube axis. The distinction of two groups of peapods with on- and off-axis molecules suggests an explanation of the apparent splitting of A(g) modes of C-60 in nanotubes measured by resonant Raman scattering.