A wide variety of two-dimensional layered materials are synthesized by liquid-phase exfoliation. Here we examine exfoliation of MoS2 into nanosheets in a mixture of water and isopropanol (IPA) containing cavitation bubbles. Using force fields optimized with experimental data on interfacial energies between MoS2 and the solvent, multimillion-atom molecular dynamics simulations are performed in conjunction with experiments to examine shock-induced collapse of cavitation bubbles and the resulting exfoliation of MoS2. The collapse of cavitation bubbles generates high-speed nanojets and shock waves in the solvent. Large shear stresses due to the nanojet impact on MoS2 surfaces initiate exfoliation, and shock waves reflected from MoS2 surfaces enhance exfoliation. Structural correlations in the solvent indicate that shock induces an ice VII like motif in the first solvation shell of water.