Poly(N-isopropylacrylamide) (PNIPAM) is the premier example of a macromolecule that undergoes a hydrophobic collapse when heated above its lower critical solution temperature (LCST). Here we utilize dynamic light scattering, H-NMR, and steady-state and time-resolved UVRR measurements to determine the molecular mechanism of PNIPAM's hydrophobic collapse. Our steady-state results indicate that in the collapsed state the amide bonds of PNIPAM do not engage in interamide hydrogen bonding, but are hydrogen bonded to water molecules. At low temperatures, the amide bonds of PNIPAM are predominantly fully water hydrogen bonded, whereas, in the collapsed state one of the two normal C=O hydrogen bonds is lost. The NH-water hydrogen bonding, however, remains unperturbed by the PNIPAM collapse. Our kinetic results indicate a monoexponential collapse with tau similar to 360 (+/- 85) ns. The collapse rate indicates a persistence length of n similar to 10. At lengths shorter than the persistence length the polymer acts as an elastic rod, whereas at lengths longer than the persistence length the polymer backbone conformation forms a random coil. On the basis of these results, we propose the following mechanism for the PNIPAM volume phase transition. At low temperatures PNIPAM adopts an extended, water-exposed conformation that is stabilized by favorable NIPAM-water solvation shell interactions which stabilize large clusters of water molecules. As the temperature increases an increasing entropic penalty occurs for the water molecules situated at the surface of the hydrophobic isopropyl groups. A cooperative transition occurs where hydrophobic collapse minimizes the exposed hydrophobic surface area. The polymer structural change forces the amide carbonyl and N-H to invaginate and the water clusters cease to be stabilized and are expelled. In this compact state, PNIPAM forms small hydrophobic nanopockets where the (i, i + 3) isopropyl groups make hydrophobic contacts. A persistent length of n similar to 10 suggests a cooperative collapse where hydrophobic interactions between adjacent hydrophobic pockets stabilize the collapsed PNIPAM.