A water-soluble diblock copolymer was prepared from sodium 2-(acrylamido)-2-methylpropanesulfonate (NaAMPS) and N-isopropylacrylamide (NIPAM) via reversible addition-fragmentation chain transfer (RAFT) controlled radical polymerization. The RAFT "living" radical polymerization process of NIPAM using an NaAMPS-based macrochain transfer agent was confirmed by the fact that the number-average molecular weight increased linearly with monomer consumption while the molecular weight distribution remained to be narrow for the polymerization. The NIPAM block exhibited a lower critical solution temperature (LOST) in water. Both the NaAMPS and NIPAM blocks are soluble in water at room temperature. At temperatures above the LOST, the NIPAM blocks associated into a polymer aggregate. The polymer aggregate was assumed to be an elongated micelle or a multiple aggregate due to intermicellar association of the spherical core-corona micelles based on characterization data obtained from H-1 NMR, turbidity, light scattering, and fluorescence probe experiments. A hydrophobic compound such as 8-anilino-1-naphthalenesulfonic acid, ammonium salt hydrate (ANS), was incorporated into the hydrophobic aggregate of the NIPAM blocks above LOST and released from the aggregate when temperature was reduced below LOST. The capture and release of ANS triggered by temperature change were completely reversible.