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A capsule hotel is a hotel system of extremely dense occupancy. Guest space is reduced in size to a modular plastic or fibreglass block roughly 2 m by 1 m by 1.25 m, providing room to sleep and little more, although facilities usually include a television and other electronic entertainment. These capsules are then grouped and stacked, two units high. Luggage is usually stored in a locker away from the capsule. Privacy is maintained by a curtain at the open end of the capsule but noise pollution can be high. Washing facilities are communal and there are often restaurants, or at least vending machines, and other entertainment facilities.

The benefit of these hotels is convenience and price, usually around $25-$ 34 a night

This style of hotel accommodation was developed in Japan and has not gained acceptance outside of the country. The Japanese capsule hotels vary widely in size, some having only fifty or so capsules and others over 700. They are often used primarily by men. There are also capsule hotels with separate male and female sleeping quarters.

The first capsule hotel was the Capsule Inn Osaka, designed by Kisho Kurokawa and located in the Umeda district of Osaka.

These rooms can be seen in the movies The Fast and the Furious: Tokyo Drift and Gung Ho. They were also used as a basis for sets in the film The Fifth Element.