We have demonstrated reversible change in transmittance of composite films, which are composed of an isotropic (I) polymer matrix and a host nematic (N) liquid crystal (LC) containing donor–acceptor type azobenzene LCs (AzoLCs) as photoresponsive molecules, by means of reversible phase transition in the LC domain. The composite films were prepared by in situ thermal polymerization-induced phase separation (PIPS) method from their homogeneous mixtures. Photoisomerization of AzoLCs was induced within the polymer network, and the resultant effect brought about isothermal change in transmittance. The photoinduced reversible and repeatable changes between opaque light scattering and clear transparent states were achieved effectively by irradiation with a monochromatic light at 366 nm. These changes are attributed to photochemical N–I phase transition and rapid thermal I–N phase transition in the host LC domain based on reversible change in molecular sharp of the guest AzoLCs. The optical effects were influenced by such factors as temperature of the composite films in the initial state and photoisomerization ability of the guest AzoLCs. The composite films acted as an optical switching material without polarizers. © 1999 American Institute of Physics.