Surfactant-intercalated layered double-hydroxide solid Mg-Al LDH-dodecyl sulfate (DDS) undergoes rapid and facile delamination to its ultimate constituent, single sheets of nanometer thickness and micrometer size, in a nonpolar solvent such as toluene to form stable dispersions. The delaminated nanosheets are electrically neutral because the surfactant chains remain tethered to the inorganic layer even on exfoliation. With increasing volume fraction of the solid, the dispersion transforms from a free-flowing sol to a solidlike gel. Here we have investigated the sol-gel transition in dispersions of the hydrophobically modified Mg-Al LDH-DDS in toluene by rheology, SAXS, and H-1 NMR measurements. The rheo-SAXS measurements show that the sharp rise in the viscosity of the dispersion during gel formation is a consequence of a tactoidal microstructure formed by the stacking of the nanosheets with an intersheet separation of 3.92 nm. The origin and nature of the attractive forces that lead to the formation of the tactoidal structure were obtained from 1D and 2D H-1 NMR measurements that provided direct evidence of the association of the toluene solvent molecules with the terminal methyl of the tethered DDS surfactant chains. Gel formation is a consequence of the attractive dispersive interactions of toluene molecules with the tails of DDS chains anchored to opposing Mg-Al LDH sheets. The toluene solvent molecules function as molecular "glue" holding the nanosheets within the tactoidal microstructure together. Our study shows how rheology, SAXS, and NMR measurements complement each other to provide a molecular-level description of the sol-gel transition in dispersions of a hydrophobically modified layered double hydroxide.