An energy dissipation mechanism during deformation is required to impart toughness to hydrogels. Here we describe how in situ small angle X-ray scattering (SAXS) provides insight into possible energy dissipation mechanisms for a tough hydrogel based on an amphiphilic copolymer where nanoscale associations of the hydrophobic moieties act as effective crosslinks. The mechanical properties of the hydrogels are intimately coupled with the nanostructure that provides reversible crosslinks and evolves during deformation. As the extension rate increases, more mechanical energy is dissipated from rearrangements of the crosslinks. The scattering is consistent with hopping of hydrophobes between the nanoscale aggregates as the primary rearrangement mechanism. This rearrangement changes the network conformation that leads to non-affine deformation, where the change in the nanostructure dimension from SAXS is less than 15% of the total macroscopic strain. These nanostructure changes are rate dependent and correlated with the relaxation time of the hydrogel. At low strain rate (0.15% s-1), no significant change of the nanostructure was observed, whereas at higher strain rates (1.5% s-1 and 8.4% s-1) significant nanostructure anisotropy occurred during extension. These differences are attributed to the ability for the network chains to rearrange on the time scale of the deformation; when the characteristic time for extension is longer than the average segmental relaxation time, no significant change in nanostructure occurs on uniaxial extension. These results illustrate the importance of strain rate in the mechanical characterization and consideration of relaxation time in the design of tough hydrogels with reversible crosslinks.