Poly(N-isopropylacrylamide), PNIPAM, is a widely studied polymer, which serves as a key constituent of nanostructured soft materials with responsive properties. Upon increasing temperature the PNIPAM polymer chain undergoes a reversible coil-to-globule transition at T ∼305K, which is reflected by a volume phase transition in cross-linked architectures, such as microgels, valuable for many practical applications. The addition of a cosolvent is a simple method to tune the transition temperature according to the specific purpose. In this study, we use atomistic molecular dynamics simulations to explore the solution behavior of a PNIPAM chain in a mixture of water and ethanol, acting as cosolvent, at low alcohol concentration. Our simulations reproduce the occurrence of the coil-to-globule transition of the polymer chain at 289 K, a temperature lower than that measured in water, in full agreement with experimental findings. By monitoring the temperature evolution of structural and dynamical properties of the PNIPAM-water-ethanol ternary system, we detect a localization of ethanol molecules at the polymer interface, mainly due to interactions between isopropyl and ethyl groups. We observe that the transition occurs without a release of adsorbed ethanol molecules, but with a loss of water molecules from the surrounding of PNIPAM hydrophobic moieties that favours the aggregation of ethanol molecules close to the polymer. Our results support the idea that both the decreased chemical potential of water in the bulk of the mixture and the competition between water and ethanol molecules in the interactions with the polymer play a driving role in the transition.