We study the structure and dynamics of poly(N‐isopropylacrylamide) (PNIPAm) core‐shell nanogels dispersed in aqueous trimethylamine N‐oxide (TMAO) solutions by means of small‐angle X‐ray scattering and X‐ray photon correlation spectroscopy (XPCS). Upon increasing the temperature above the lower critical solution temperature of PNIPAm at 33 °C, a colloidal gel is formed as identified by an increase of I(q) at small q as well as a slowing down of sample dynamics by various orders of magnitude. With increasing TMAO concentration the gelation transition shifts linearly to lower temperatures. Above a TMAO concentration of approximately 0.40 mol/L corresponding to a 1 : 1 ratio of TMAO and NIPAm groups, collapsed PNIPAm states are found for all temperatures without any gelation transition. This suggests that reduction of PNIPAm‐water hydrogen bonds due to the presence of TMAO results in a stabilisation of the collapsed PNIPAm state and suppresses gelation of the nanogel.