The third-order nonlinear optical response of the water-soluble inclusion complex consisting of C-60 incorporated in gamma-cyclodextrin was examined employing the z-scan technique. Using 532 nm, 10 ns laser pulses, significant optical limiting action was observed. the effect being slightly lower than that of pure C-60 diluted in toluene. Ageing of the C-60/gamma-cyclodextrin-water solution results in the formation of aggregates that enhance the optical limiting action by a factor of almost two.