Although Brust-Schiffrin two-phase synthesis is a popular method for synthesizing ligand-protected metal nanoparticles with an average size of less than 5 nm, the details on how the reactions can be controlled from a mechanistic point of view are still unclear, therefore hindering efforts to synthesize monodisperse metal nanoparticles. It was recently discovered that this method is basically an inverse-micelle-based synthesis (Li, Y.; Zaluzhna, O.; Xu, B.; Gao, Y.; Modest, J. M.; Tong, Y. Y. J. J. Am. Chem. Soc. 2011, 133, 2092). In this letter, the critical role of water and the structure of inverse micelles in typical synthesis of gold nanoparticles were further investigated. We found that (1) water encapsulated in the inverse micelles of [TOA](+) that also hosted metal ions formed a hydrophilic microenvironment that acted as a reaction-enabling proton-accepting medium for the thiol protons (RS-H) and (2) not only the presence but also the amount of water in the reaction medium has a profound effect on the Au(I) precursor species (a pure [TOA] [AuX2] complex or a mixture of a [TOA][AuX2] complex and polymeric [(AuSR)-S-I](n) species), the reduction of Au(III) by thiols, and the formation of uniform small metal nanoparticles. A quantitative analysis of the H-1 NMR of the encapsulated water enabled an estimation of the size and composition of the involved inverse micelles.