Although trimethylamine N -oxide (TMAO) is perhaps the quintessential protein-stabilizing osmolyte, its mechanism of action has long remained elusive. Our study indicates that, in contrast to betaine and glycine, TMAO forms direct attractive interactions with polypeptides. This work strengthens and extends Berne’s previous conclusions, because we report results for a model polypeptide rather than a hydrophobic polymer. Our results are particularly striking, because we consider a model polypeptide that is enriched in amide groups that are believed responsible for the depletion of TMAO from unfolded proteins. Our study leads to the surprising conclusion that TMAO stabilizes folded conformations, despite interacting with unfolded conformations. We hypothesize that TMAO acts as a unique surfactant for the heterogeneous surface that emerges on protein folding. We report experimental and computational studies investigating the effects of three osmolytes, trimethylamine N -oxide (TMAO), betaine, and glycine, on the hydrophobic collapse of an elastin-like polypeptide (ELP). All three osmolytes stabilize collapsed conformations of the ELP and reduce the lower critical solution temperature (LSCT) linearly with osmolyte concentration. As expected from conventional preferential solvation arguments, betaine and glycine both increase the surface tension at the air–water interface. TMAO, however, reduces the surface tension. Atomically detailed molecular dynamics (MD) simulations suggest that TMAO also slightly accumulates at the polymer–water interface, whereas glycine and betaine are strongly depleted. To investigate alternative mechanisms for osmolyte effects, we performed FTIR experiments that characterized the impact of each cosolvent on the bulk water structure. These experiments showed that TMAO red-shifts the OH stretch of the IR spectrum via a mechanism that was very sensitive to the protonation state of the NO moiety. Glycine also caused a red shift in the OH stretch region, whereas betaine minimally impacted this region. Thus, the effects of osmolytes on the OH spectrum appear uncorrelated with their effects upon hydrophobic collapse. Similarly, MD simulations suggested that TMAO disrupts the water structure to the least extent, whereas glycine exerts the greatest influence on the water structure. These results suggest that TMAO stabilizes collapsed conformations via a mechanism that is distinct from glycine and betaine. In particular, we propose that TMAO stabilizes proteins by acting as a surfactant for the heterogeneous surfaces of folded proteins.