Ionic liquids (ILs) are designer solvents that find wide applications in various areas. Recently, ILs have been shown to induce the refolding of certain proteins that were previously denatured under the treatment of urea. A molecular-level understanding of the counteracting mechanism of ILs on urea-induced protein denaturation remains elusive. In this study, we employ atomistic molecular dynamics simulations to investigate the ternary urea-water-IL solution in comparison to the aqueous urea solution to understand how the presence of ILs can modulate the structure, energetics, and dynamics of urea-water solutions. Our results show that the ions of the IL used, ethylammonium nitrate (EAN), interact strongly with urea and disrupt the urea aggregates that were known to stabilize the unfolded state of the proteins. Results also suggest a disruption in urea-water interaction that releases more free water molecules in solution. We subsequently strengthened these findings by simulating a model peptide in the absence and presence of EAN, which showed broken versus intact secondary structure in urea solution. Analyses show that these changes were accomplished by the added IL, which enforced a gradual displacement of urea from the peptide surface by water. We propose that the ILs facilitate protein renaturation by breaking down the urea aggregates and increasing the amount of free water molecules around the protein.