Several models for interactions between trifluoroethanol (TFE) and peptides and proteins have recently been proposed, but none have been able to rationalize the puzzling observations that on the one hand TFE can stabilize some hydrophobic interactions in secondary structures, but on the other can also melt the hydrophobic cores of globular proteins. The former is illustrated in this paper by the effect of TFE on a short elastin peptide, GVG(VPGVG)(3), which forms type II beta-turns stabilized by hydrophobic interactions between two intra-turn valine side chains. This folding, driven by increasing the entropy of bulk water, is stimulated in TFE-water mixtures and/or by raising the temperature. To explain these apparently contradictory observations, we propose a model in which TFE clusters locally assist the folding of secondary structures by first breaking down interfacial water molecules on the peptide and then providing a solvent matrix for further side chain--side chain interactions. This model also provides an explanation for TFE-induced transitions between secondary structures, in which the TFE clusters may redirect non-local to local interactions.