Interactions of surfactants with hydrophobically modified polyelectrolytes in aqueous solutions are important in several applications such as detergents, cosmetics, foods, and paints. Fundamental questions arise on the mechanisms of complexation of the polyelectrolyte and surfactant that control their behavior. In this work, the complexation was studied by examining interactions in aqueous solutions of a hydrophobically modified polymer, poly(maleic acid/octyl vinyl ether) (PMAOVE), with sodium dodecyl sulfate (SDS) by monitoring viscosity, pyrene solubility, light scattering, and analytical ultracentrifugation. When the anionic surfactant SDS was added to aqueous solutions of the similarly charged polymer PMAOVE, the surfactant was incorporated into the hydrophobic nanodomains of PAMOVE even far below the cmc of the surfactant. On the basis of viscosity, pyrene solubility, and analytical ultracentrifugation data, it is proposed that PMAOVE undergoes structural unfolding and at higher SDS concentrations mixed micelles are formed.