Catalysis, as a key and enabling technology, plays an increasingly important role in fields ranging from energy, environment and agriculture to health care. Rational design and synthesis of highly efficient catalysts has become the ultimate goal of catalysis research. Thanks to the rapid development of nanoscience and nanotechnology, and in particular a theoretical understanding of the tuning of electronic structure in nanoscale systems, this element of design is becoming possible via precise control of nanoparticles’ composition, morphology, structure and electronic states. At the same time, it is important to develop tools for in-situ characterization of nanocatalysts under realistic reaction conditions, and for monitoring the dynamics of catalysis with high spatial, temporal and energy resolution. In this review, we discuss confinement effects in nanocatalysis, a concept that our group has put forward and developed over several years. Taking the confined catalytic systems of carbon nanotubes (CNTs), metal-confined nano-oxides, and two-dimensional (2D) layered nano-catalysts as examples, we summarize and analyze the fundamental concepts, the research methods and some of the key scientific issues involved in nanocatalysis. Moreover, we present a perspective on the challenges and opportunities in future research on nanocatalysis from the aspects of: 1) controlled synthesis of nano-catalysts and rational design of catalytically active centers; 2) in-situ characterization of nanocatalysts and dynamics of catalytic processes; 3) computational chemistry with a complexity approximating that of experiments; and 4) scale-up and commercialization of nanocatalysts.