Capital firm has an atmosphere (5)
I believe the answer is:
cairo
'capital' is the definition.
(capital of Egypt)
'firm has an atmosphere' is the wordplay.
'firm' becomes 'co' (a firm is a company).
'has' indicates putting letters inside.
'an atmosphere' becomes 'air' ('air' can be a synonym of 'atmosphere').
'co' enclosing 'air' is 'CAIRO'.
(Other definitions for cairo that I've seen before include "Port upstream from the Nile delta" , "Egyptian capital" , "Al Qahira" , "North African capital" , "Egypt's capital" .)