Sonication-induced tryptophan- and tyrosine-based peptide bolaamphiphile nanofibers have been used to synthesize and stabilize Pd nanoparticles under physiological conditions. The peptide bolaamphiphile self-assembly process has been thoroughly studied by using several spectroscopic and microscopic techniques. The stiffness of the soft hydrogel matrix was measured by an oscillatory rheological experiment. FTIR and circular dichroism (CD) experiments revealed a hydrogen-bonded β-sheet conformation of peptide bolaamphiphile molecules in a gel-phase medium. The π–π stacking interactions also played a crucial role in the self-assembly process, which was confirmed by fluorescence spectroscopy. Electron (SEM and TEM) and atomic force microscopy (AFM) studies showed that the peptide bolaamphiphile molecules self-assemble into nanofibrillar structures. Pd nanoparticles were synthesized in the hydrogel matrix in which redox-active tryptophan and tyrosine residues reduce the metal ions to metal nanoparticles. The size of the Pd nanoparticles are in the range of 3–9 nm, and are stabilized by peptide nanofibers. The peptide-nanofiber-supported Pd nanoparticles have shown effective catalytic activity for the removal of N-terminus protecting groups of amino acids and peptides.