The absorption and emission characteristics of donor-acceptor charge transfer system 4-amino-3-methyl benzoic acid methyl ester (AMBME), capable of dual emission, i.e., local emission (LE) and charge transfer (CT) emission, have been investigated inside the β-cyclodextrin (β-CD) nanocavity in the aqueous and non-aqueous dimethylsulphoxide (DMSO) medium. Large enhancement of both LE and CT band in aqueous β-CD medium is due to decrease in non-radiative processes in less polar and restricted environment. Whereas in non-aqueous DMSO medium the CT process is hindered as a result CT intensity decreases with enhancement of LE band. These spectral differences indicate that in aqueous medium the donor -NH2 group sticking in the hydrophilic region of β-CD cavity whereas in non-aqueous DMSO medium it exists in the hydrophobic part of the cavity. Spectral characteristics indicate that different stoichiometry of host-guest inclusion complexes are formed in aqueous and non-aqueous β-CD medium.