The energetics of large diameter carbon nanotubes encapsulating C 60 molecules ͑peapods͒ have been studied by using the local density approximation in the density-functional theory ͑DFT͒. We find that the energy gain ascribed to the encapsulation of C 60 increases under the elliptical deformation of the nanotubes compared to that for the nanotubes with circular cross section. The energy cost of the deformation of nanotubes is found to be less than 10 meV per atom and is found to be the largest for the ͑20,20͒ nanotube. We also explore the energetics of the aggregation of encapsulated C 60 in the nanometer-scale space of the ͑10,10͒ nanotube. The total energy of the dimerized C 60 encapsulated in the ͑10,10͒ nanotube is lower by 0.2 eV per atom than that of the isolated C 60 indicating that the dimerization reaction is exothermic. The activation barrier for the dimerization of C 60 is about 1.4 eV, so that the spontaneous dimerization of C 60 is unlikely to take place without any external stimuli such as electron irradiation.