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.

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, and are often male only. There are also capsule hotels with separate male and female sleeping quarters. Clothes and shoes are sometimes exchanged for a yukata and slippers on entry. A towel may also be provided. The benefit of these hotels is convenience and price; usually around 5000-40000 yen a night (€21-29, $25–34, £15–20). Such hotels are not necessarily regarded as only an option for those with lower incomes - a typical customer would be the business salariman after a night of drinking.

The first capsule hotel was the Capsule Inn Osaka, designed by Kurokawa Kisho and located in the Umeda district of Osaka. It opened on February 1, 1979 and the initial room rate was 1,600 yen.