Effect of cyclodextrin encapsulation on the photophysics of three indoloquinoline derivatives, namely, 5-methyl-5H-indolo[3,2-c]quinoline (MIQ), 8-chloro-5-methyl-5H-indolo[3,2-c]quinoline (CMIQ), and 2,8-dichloro-5-methyl-5H-indolo[3,2-c]quinoline (DCMIQ), has been studied using steady state and time-resolved fluorescence spectroscopy. The three compounds, which are basically cryptosanguinolentines, exist mainly in their zwitterionic forms in the excited state. Appreciable emission from the pi-pi* state can be observed on excitation of the compounds at a specific wavelength. The existence of zwitterions in the excited state leads to mutual interaction to form dimers triggered by the presence of the hydrophobic nanocavities of cyclodextrins (CDs) through Coulombic interaction. This is evidenced by steady state fluorescence measurements and treating the fluorophores with CDs of different cavity space. The photophysical behavior of the compounds gets dramatically modulated when they are treated with alpha-, beta-, and gamma-CD hosts. Presence of chloro substituent/s on the parent molecule and the extent of encapsulation by CDs of different dimensions exhibit enormous alterations in the fluorescence characteristics of the compounds. Solvation of the chromophoric moiety by water molecules deviates in character due to the guest-host interaction. Trapped water molecules inside the bigger cavity of gamma-CD seem to play a vital role in quenching the fluorescence of the zwitterions of the molecules.