The mechanisms controlling the reduction of cobalt and the growth of metallic cobalt clusters in Co-MCM-41 catalysts at different stages in the process of single-wall carbon nanotubes (SWNT) synthesis were investigated both by in-situ and ex-situ X-ray absorption spectroscopy. We have found that prereduction of the catalyst in hydrogen at temperatures below 700 degreesC does not reduce the cobalt ions to metallic cobalt, but removes hydroxyl groups and oxygen ions creating oxygen vacancies and/or a partially reduced cobalt species. The prereduction treatment, however, does increase the density of electrons at the Fermi level weakening the interaction of Co2+ with the silica framework. Subsequent exposure of the catalyst to CO at 750 degreesC causes CO to strongly interact with the cobalt clusters most likely by the transfer of electrons into the d orbitals of Co. This strong interaction makes the cobalt more mobile at the surface and allows it to nucleate into clusters capable of dissociating CO and initiating the growth of SWNT. Prior to exposure to CO, the reduced cobalt species strongly interacting with the silica framework do not nucleate into larger clusters in the presence of He or H-2 preserving near atomic cobalt dispersion, as determined by EXAFS.