The major focus of the present work lies in exploring the influence of nanoconfinement within aerosol-OT (AOT) reverse micelles on the binding interaction of two phenazinium-based photosensitizers, namely, phenosafranin (PSF) and safranin-O (SO), with the DNA duplex. Circular dichroism and dynamic light-scattering studies reveal the condensation of DNA within the reverse micellar interior (transformation of the B-form of native DNA to φ-form). Our results unveil a remarkable effect of the degree of hydration of the reverse micellar core on the stability of the stacking interaction (intercalation) of the drugs (PSF and SO) into DNA; increasing size of the water nanopool (that is, w0) accompanies decreasing curvature of the DNA duplex structure with the consequent effect of increasing stabilization of the drug:DNA intercalation. The marked differences in the dynamical aspects of the interaction scenario following encapsulation within the reverse micellar core and the subsequent dependence on the size of the water nanopool are also meticulously explored. The differential degrees of steric interactions offered by the drug molecules (presence of methyl substitutions on the planar phenazinium ring in SO) are also found to affect the extent of intercalation of the drugs to DNA. In this context, it is imperative to state that the water pool of the reverse micellar core is often argued to approach bulk-like properties of water with increasing micellar size (typically w0 ≥ 10), so that deviation from the bulk water properties is likely to be minimized in large reverse micelles (w0 ≥ 10). On the contrary, our results (particularly quantitative elucidation of micropolarity and dynamical aspects of the interaction) explicitly demonstrate that the bulk-like behavior of the nanoconfined water is not truly achieved even in large reverse micelles. © 2018 American Chemical Society.