We present a method to fill 2-5-nm-diameter channels of closed multiwalled carbon nanotubes (MWNT) with an aqueous fluid and perform in situ high-resolution observations of fluid dynamic behaviour in this confined system. Transmission electron microscope (TEM) observations confirm the successful filling of two types of MWNTs and reveal disordered gas/liquid interfaces contrasting the smooth curved menisci visualized previously in MWNT with diameter above 10 nm. Electron energy loss spectroscopy (EELS) and energy dispersive spectrometry (EDS) analyses, along with TEM simulation, indicate the presence of water in MWNT. A wet-dry transition on the nanometer scale is also demonstrated by means of external heating. The results suggest that when ultrathin channels such as carbon nanotubes contain water, fluid mobility is greatly retarded compared to that on the macroscale. The present findings pose new challenges for modeling and device development work in this area.