The excited-state dynamics of a reactive dye molecule, auramine O, have been studied in nanoscale water droplets stabilized by a nonionic surfactant. Spectral dynamics were measured as a function of the radius of the water nanodroplet with 50 fs time resolution using time-resolved fluorescence up-conversion method. Qualitatively, the effect of confinement is to dramatically slow the rate of the reaction compared to that of bulk water. Data were quantitatively analyzed using the one-dimensional generalized Smoluchowski equation assuming a time-dependent diffusion coefficient. The results were contrasted with our earlier analysis of auramine O in aqueous nanodroplets stabilized by the ionic surfactant AOT. The excited-state reaction is slower in the nonionic surfactant, showing that interfacial charge is not required to suppress reactions in nanoscale water droplets. The location of the dye in the heterogeneous micelle is investigated by comparing the absorption spectra of AO in the micelle with those of a water- polyethyleneglycol mixture (to mimic the surfactant head group). The results suggest that the charged dye is located in the water phase.