Engineered virus-like particles (VLP) are attractive for fabricating nanostructured materials for applications in diverse areas such as catalysis, drug delivery, biomedicine, composites, etc. Basic understanding of the interaction between the inorganic guest and biomolecular host is thus important for the controlled synthesis of inorganic nanoparticles inside VLP and rational assembly of ordered VLP-based hierarchical nanostructures. We have investigated in detail the formation mechanism and growth kinetics of semiconducting nanocrystals confined inside genetically engineered bacteriophage P22 VLP using semiconducting CdS as a prototypical example. The selective nucleation and growth of CdS at the engineered sites is found to be uniform during the early stage, followed by a more stochastic growth process. Furthermore, kinetic studies reveal that the presence of an engineered biotemplate helps in significantly retarding the reaction rate. These findings provide guidance for the controlled synthesis of a wide range of other inorganic materials confined inside VLP, and are of practical importance for the rational design of VLP-based hierarchical nanostuctures.