Poly(ethylene glycol) (PEG) end capped with biodegradable hydrophobic dipeptides shows versatile gelation behavior in a wide range of aqueous and organic solvents. This gelation characteristic is attributed to the aggregation of polymer chains induced by dipeptide end groups. Both PEG molecular weight and molecular structure of end groups control this aggregation by striking a balance between two opposing molecular interactions: solubility of the PEG segment which tends to dissolve the polymer while hydrophobic and intermolecular noncovalent interactions between the end groups induce aggregation. Morphologically, this aggregated structure forms interpenetrating nano sheets with characteristic microstructural features. These gels are biodegradable and possess physicomechanical characteristics suitable for biomedical applications. Furthermore, proteins and hydrophobic model drugs can be encapsulated within the gels from aqueous and organic solvents, respectively, and can be released in a controlled fashion which indicates the applicability of the gels as drug delivery vehicles.