Ternary solutions consisting of urea, tert-butyl alcohol (TBA), and water are investigated employing molecular dynamics simulations. The main purpose of the present paper is to investigate the effect of urea on TBA aggregation and by extension its influence on hydrophobic interactions. The aggregation of TBA can be detected from the concentration dependence of structural properties such as first-shell TBA-water coordination numbers and TBA-TBA hydrogen-bond numbers, as well as through changes in the translational diffusion coefficients of TBA. It is found that urea acts to delay the association of TBA to concentrations greater than those required to cause TBA aggregation in binary TBA-water systems. It is shown that urea acts through a direct mechanism, whereby it preferentially binds to TBA replacing water from the first coordination shell. TBA-urea hydrogen bonds can be as strong as, or stronger than, those of TBA-water, and urea binds to both the hydrophilic and hydrophobic moieties of TBA. Our observations are qualitatively consistent with experimental results for urea-TBA-water solutions and with recent simulation studies of urea's action as a protein denaturant.