Mono layer-protected gold nanoparticles (AuNPs) are a promising new class of nanomaterials with applications in drug delivery, self-assembly, and biosensing. The versatility of the AuNP platform is conferred by the properties of the protecting monolayer which can be engineered to tune the surface functionality of the nanoparticles. However, many applications are hampered by AuNP aggregation, which can inhibit functionality or induce particles to precipitate out of solution, even for water-soluble AuNPs. It is critical to understand the mechanisms of aggregation in order to optimally engineer protecting monolayers that both inhibit aggregation and maintain functionality. In this work, we use implicit solvent simulations to calculate the free energy change associated with the aggregation of two small, charged, alkanethiol monolayer-protected AuNPs under typical biological conditions. We show that aggregation is driven by the hydrophobic effect related to the amphiphilic nature of the alkanethiol ligands. The critical factor that enables aggregation is the deformation of ligands in the monolayer to shield hydrophobic surface area from water upon close association of the two particles. Our results further show that ligand deformation, and thus aggregation, is highly dependent on the size of the AuNPs, choice of ligands, and environmental conditions. This work provides insight into the key role that ligand ligand interactions play in stabilizing AuNP aggregates and suggests guidelines for the design of protecting monolayers that inhibit aggregation under typical biological conditions.