The growth dynamics of bamboo-like multiwalled carbon nanotubes (BCNTs) via catalytic decomposition of C2H2 on Ni catalyst at 650 degrees C was observed in real time using an in situ ultrahigh vacuum transmission electron microscope. During BCNT growth, the shape of the catalyst particle changes constantly but remains metallic and crystalline. Graphene sheets (bamboo knots) within the nanotube preferentially nucleate on the multistep Ni-graphite edges at the point where the graphene joins the catalyst particle, where it is stabilized by both the graphene walls and the Ni catalyst surface. The growth of a complete inner graphene layer growth prior to contraction of the Ni catalyst particle due to restoring cohesive forces will result in a complete BCNT knot whereas partial growth of the inner wall will lead to an incomplete BCNT knot.