Encapsulation of a nitroxide spin label into a host cavity can prolong the lifetime of the spin label in biological tissues and other environments. Although such paramagnetic supramolecular complexes have been extensively studied experimentally, there is yet little understanding of the role of the encapsulation on the magnetic properties of the spin labels and their performance at the atomistic level. In this work, we approach this problem by modeling encapsulation induced changes of the magnetic properties of spin labels for a prototypical paramagnetic guest-host complex, 2,2,6,6-tetramethyl-4-methoxypiperidine-1-oxyl, enclosed in the hydrophobic cavity of cucurbit[8]uril, using state-of-the-art hybrid quantum mechanics/molecular mechanics methodology. The results allow a decomposition of the encapsulation shift of the electronic g-tensor and the nitrogen isotropic hyperfine coupling constant of nitroxide radical into a set of distinct contributions associated with the host cavity confinement and with changes of the local solvent environment of the spin label upon encapsulation. It is found that the hydrophobic cavity of cucurbit[8]uril only weakly influences the electronic g-tensor of the 2,2,6,6-tetramethyl-4-methoxypiperidine-1-oxyl but induces a significant encapsulation shift of the nitrogen hyperfine coupling constant. The latter is caused by the change of topology of the hydrogen bonding network and the nature of the hydrogen bonds around the spin label induced by the hydrophobic cavity of the inclusion host. This indirect effect is found to be more important than the direct influence of the cavity exerted on the radical. The ramification of this finding for the use of approximate methods for computing electron paramagnetic resonance spectra of spin labels and for designing optimal spin labels based on guest-host templates is discussed.