The picosecond dynamics of a bifunctional and H-bonding molecule, 7-hydroxyquinoline (7HQ), has been studied in a reverse micelle with increasing water content. The fluorescence kinetics has a complex behavior as the water content is changed. All reactions are irreversible, and a two-step mechanism is invoked to explain the observations. H2O/D2O exchange and excitation energy effects show that the second step has a higher barrier and that the corresponding reaction occurs through tunneling. The results clearly indicate two regimes of water nanopool behavior switching at W-0 approximate to 5 (W-0 = [water]/[surfactant]). Water collective dynamics explains these observations. The lower fluidity of confined water within the reverse micelle with respect to normal bulk water alters the related H-bond network dynamics and therefore is responsible for the slower proton-transfer processes.