Gamma-CD has been used to dissolve C60 in water. Depending on the concentration of cyclodextrin two forms of solutions can exist. At high gamma-CD:C60 ratio a complex that is monomeric in C60 is stable whereas at lower gamma-CD:C60 ratio a cluster of several C60 molecules surrounded by gamma-CD can exist. We propose that clusters of different sizes can be formed. The gamma-CD:C60 complex have an electronic absorption spectrum similar to that of an organic solution of C60 and the cluster have an electronic absorption spectrum similar to that of a thin film of C60. For the gamma-CD:C60 complex the photophysical properties are similar to those of an organic solution with the exceptions for quenching of the triplet state by molecular oxygen and annihilation of the triplet state. The rate constant for quenching of the triplet is reduced by a factor two and the rate constant for annihilation of triplets is reduced by a factor four when compared to those expected for a ''free'' C60, respectively. The properties of the clusters are different from those of an organic solution of C60. For water solutions of small clusters, decay of the excited state of the cluster is clearly dependent on the intensity of the excitation laser pulse, at high laser intensity there is both a fast and a slow component m the decay process whereas at low laser intensity only the slow process is observed. For excitation of larger clusters we could only detect a fast decay process.