We demonstrate in this work that the surface tension, water‐organic solvent, transfer‐free energies and the thermodynamics of melting of linear alkanes provide fundamental insights into the nonpolar driving forces for protein folding and protein binding reactions. We first develop a model for the curvature dependence of the hydrophobic effect and find that the macroscopic concept of interfacial free energy is applicable at the molecular level. Application of a well‐known relationship involving surface tension and adhesion energies reveals that dispersion forces play little or no net role in hydrophobic interactions; rather, the standard model of disruption of water structure (entropically driven at 25°C) is correct. The hydrophobic interaction is found, in agreement with the classical picture, to provide a major driving force for protein folding. Analysis of the melting behavior of hydrocarbons reveals that close packing of the protein interior makes only a small free energy contribution to folding because the enthalpic gain resulting from increased dispersion interactions (relative to the liquid) is countered by the freezing of side chain motion. The identical effect should occur in association reactions, which may provide an enormous simplification in the evaluation of binding energies. Protein binding reactions, even between nearly planar or concave/convex interfaces, are found to have effective hydrophobicities considerably smaller than the prediction based on macroscopic surface tension. This is due to the formation of a concave collar region that usually accompanies complex formation. This effect may preclude the formation of complexes between convex surfaces.