Mixing of elements at the nanoscale can offer exciting possibilities of novel materials with compositions, structures and properties quite different from those known in bulk. Ab initio calculations are expected to play a major role in understanding their properties as well as in predicting and designing such materials. Here, we briefly review recent progress where encapsulation of an atom A or a group of atoms G or exohedral atom(s) have been used to stabilize cage-like nanoclusters/fullerenes of material B. The encapsulation enhances the stability of nanoclusters and can lead to striking preference for a specific size. This can facilitate the design and production of nanoclusters with specific properties in high abundances and the development of assemblies of such species. We discuss the electronic origin of the stability of such species as well as assemblies of size selected nanoparticles that have led to the formation of nanowires and nanotubes. Several examples of such clusters of semiconductors and metals are presented. {\textcopyright} 2005 Elsevier B.V. All rights reserved.