Co filled carbon nanocapsules, which are formed by a heat treatment of the mixture of Co and diamond nanoparticles, have been studied by in situ transmission electron microscopy (TEM), x-ray diffraction, and Raman spectroscopy. Raman studies show that the heat treatment reduces the surface native oxide (Co3O4) of Co nanoparticles. The reduction is accompanied by graphitization of diamond nanoparticles, indicating that diamond nanoparticles being in contact with the metallic Co are transformed into graphitic coating. The in situ TEM studies show that the graphitic coating is formed in the heating process, not in the cooling process. Furthermore, once the coating is completed, the number of the graphitic layers is almost constant on further heating and cooling. These results allow us to conclude that metallic Co particles simply act as templates for graphitic coating.