The replacement reaction between hydrophobized Ag nanoparticles and hydrophobized AuCl4- in toluene has been examined in detail. The conclusions obtained under our experimental conditions are different from those reported in the literature in three aspects: (1) a detectable contraction of the Ag nanoparticle sacrificial templates during the course of the reaction is shown; (2) the deposition of Au on the shrunken Ag templates inhibits further Ag oxidation, resulting in the formation of core-shell Ag-Au nanoparticles instead of Au nanoshells; and (3) the significant red-shift in the surface plasmon resonance (SPR) band is more of a consequence of shape and chemical composition changes rather than as an indication of Au nanoshell formation. Solvent and temperature are influential environmental factors that determine the structure and composition of nanoparticles formed by the replacement reaction.