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The coil–globule transition of aqueous polymers is of profound significance in understanding the structure and function of responsive soft matter. In particular, the remarkable effect of amphiphilic cosolvents (e.g., alcohols) that leads to both swelling and collapse of stimuli-responsive polymers has been hotly debated in the literature, often with contradictory mechanisms proposed. Using molecular dynamics simulations, we herein demonstrate that alcohols reduce the free energy cost of creating a repulsive polymer–solvent interface via a surfactant-like mechanism which surprisingly drives polymer collapse at low alcohol concentrations. This hitherto neglected role of interfacial solvation thermodynamics is common to all coil–globule transitions, and rationalizes the experimentally observed effects of higher alcohols and polymer molecular weight on the coil-to-globule transition of thermoresponsive polymers. Polymer–(co)solvent attractive interactions reinforce or compensate this mechanism and it is this interplay which drives polymer swelling or collapse.