Many-electron effects often dramatically modify the properties of reduced dimensional systems. We report calculations, based on an ab initio many-electron Green's function approach, of electron-hole interaction effects on the optical spectra of small-diameter single-walled carbon nanotubes. Excitonic effects qualitatively alter the optical spectra of both semiconducting and metallic tubes. Excitons are bound by approximately 1 eV in the semiconducting (8,0) tube and by approximately 100 meV in the metallic (3,3) tube. These large many-electron effects explain the discrepancies between previous theories and experiments.