Lipid nanoparticles (LNPs) have emerged as a promising delivery system, particularly for genetic therapies and vaccines. LNP formation requires a specific mixture of nucleic acid in a buffered solution and lipid components in ethanol. Ethanol acts as a lipid solvent, aiding the formation of the nanoparticle’s core, but its presence can also affect LNP stability. In this study, we used molecular dynamics (MD) simulations to investigate the physicochemical effect of ethanol on LNPs and gain a dynamic understanding of its impact on the overall structure and stability of LNPs. Our results demonstrate that ethanol destabilizes LNP structure over time, indicated by increased root mean square deviation (RMSD) values. Changes in the solvent-accessible surface area (SASA), electron density, and radial distribution function (RDF) also suggest that ethanol affects LNP stability. Furthermore, our H-bond profile analysis shows that ethanol penetrates the LNP earlier than water. These findings emphasize the importance of immediate ethanol removal in lipid-based systems during LNP production to ensure stability.