We propose a novel class of nonvolatile memory elements based on the modification of the transport properties of a conducting carbon nanotube by the presence of an encapsulated molecule. The guest molecule has two stable orientational positions relative to the nanotube that correspond to conducting and nonconducting states. The mechanism, governed by a local gating effect of the molecule on the electronic properties of the nanotube host, is studied using density functional theory. The mechanisms of reversible reading and writing of information are illustrated with a F4TCNQ molecule encapsulated inside a metallic carbon nanotube. Our results suggest that this new type of nonvolatile memory element is robust, fatigue-free, and can operate at room temperature.