The mechanical response of nanoparticles is different than that of thin-films during nanoindentation tests. Moreover, it was shown experimentally that smaller nanoparticles are softer for nanoindentation. This size effect was attributed to the proximity of the free lateral surfaces to the indenter, which leads to dislocation-free surface interactions. We present here a multiscale study to show that the size effect is controlled by the interaction of the plastic zone formed beneath the indent and the lateral free surfaces. The detailed dislocation mechanisms and their interactions with the free surfaces are investigated using molecular dynamics (MD) and discrete dislocation dynamics (DDD) simulations. Au nanoparticles in the size range of 9–116 nm were indented with these two simulation techniques. The simulations show that shear dislocation loops are nucleated beneath the indent on all slip planes. Dislocations interactions facilitate their escape from beneath the indent, either by forming v- and u-shaped dislocations or prismatic loops that glide towards the lower part of the nanoparticles, or through glissile interactions that promote lateral dislocation motion. The effect of size on these dislocation mechanisms is discussed.