  For a smooth, bounded domain $\Omega$, $s\in(0,1)$, $p\in
\left(1,\frac{n+2s}{n-2s}\right)$ we consider the nonlocal equation $$
\epsilon^{2s} (-\Delta)^s u+u=u^p \quad {\mbox{in}}\Omega $$ with zero
Dirichlet datum and a small parameter $\epsilon>0$. We construct a family of
solutions that concentrate as $\epsilon \to 0$ at an interior point of the
domain in the form of a scaling of the ground state in entire space. Unlike the
classical case $s=1$, the leading order of the associated reduced energy
functional in a variational reduction procedure is of polynomial instead of
exponential order on the distance from the boundary, due to the nonlocal
effect. Delicate analysis is needed to overcome the lack of localization, in
particular establishing the rather unexpected asymptotics for the Green
function of $ \epsilon^{2s} (-\Delta)^s +1$ in the expanding domain
$\epsilon^{-1}\Omega$ with zero exterior datum.
