Dissociation of a diatomic molecule and the excited-state distribution of the nascent atomic fragments can be detected and characterized by atomic wavepacket interferometry and a coherent nonlinear optical process, such as parametric four-wave mixing (PFWM), in ultrafast pump–probe experiments. Underlying these experiments is a reliance on atom–atom interaction to alter the properties of an atomic wavepacket which, in turn, impacts the phase and amplitude of a coherent optical signal. Specifically, quantum beating in the atomic species provides a sensitive, in situ probe of molecular dissociation by detecting approaching dissociation fragments through long-range dipole–dipole interaction. The resulting influence of this interaction on the amplitude and phase of the quantum beating is observed in temporal or Fourier domains by probing the wavepacket by interferometry and PFWM with 100–150 fs laser pulses. The wavepacket thus serves as a detector of molecular dissociation fragments and the dynamics of atom–atom interactions are converted into the macroscopic domain by the PFWM signal and idler waves. Femtosecond pump–probe experiments are described in which the predissociation of electronically excited Rb2 states in the ∼24 000–28 000 cm−1 interval, and the distribution of nascent atomic fragments into Rb excited states (7s, 5d, 6s, 4d and 5p) spanning an energy range >1.25 eV, have been observed in Rb vapour with atomic number densities of ∼6 × 1013–3 × 1017 cm−3. Quantum beating at 18.2 THz (corresponding to the Rb 7s–5dJ (J = 5/2) energy defect of ∼608 cm−1) is superimposed onto the axially phase matched PFWM signal wave generated at λS ∼ 420 nm (Rb 62PJ → 52S1/2 transitions) and recovered by Fourier analysis of the signal wave intensity as the pump–probe time delay (Δt) is scanned. The dominant exit channels for Rb2 predissociation are found to be sensitive to the interval of internuclear separation R in which the molecular wavepacket, produced by the pump pulse through two-photon association of Rb–Rb collision pairs, is localized. Generating Rb2 wavepackets on 3Λu (Λ = Σ, Δ) potential surfaces at large R (∼7–9 Å) favours the Rb 7s and 5d dissociation channels. In contrast, producing dimer wavepackets localized in the R ∼ 3–4 Å region suppresses Rb (7s, 5d) generation and favours the production of Rb atomic fragments (primarily 5p) with less internal energy, but maximum velocities of ∼15–20 Å ps−1. Laser excitation spectroscopy on the nanosecond time scale suggests that the (3)3Δu and (7)3Σ+u states of Rb2 (correlated with Rd (5d) + Rb (6s) in the separated atom limit), and possibly a 3Σ+u state derived from the Rb (7p) + Rb (5s) asymptote, are populated by two-photon absorption of Rb–Rb ground-state collision pairs and predissociation of these levels provides the excited atomic fragments subsequently detected by atomic wavepackets. The data presented here demonstrate the observation of the molecular dissociation transient and the determination of the nascent statistical distribution of atomic product states in a manner that is unencumbered by radiative lifetime or collisional effects. A wavepacket, in tandem with the dipole–dipole interaction and a coherent nonlinear optical process, provides a new avenue for pursuing atom–atom and atom–molecular interactions over a broad range in inter-particle separations.