A photoresponsive micellar solution is developed as a promising working fluid for district heating/cooling systems (DHCs). It can be reversibly switched between a drag reduction (DR) mode and an efficient heat transfer (EHT) mode by light irradiation. The DR mode is advantageous during fluid transport, and the EHT mode is favored when the fluid passes through heat exchangers. This smart fluid is an aqueous solution of cationic surfactant oleyl bis(2-hydroxyethyl)methyl ammonium chloride (OHAC, 3.4 mM) and the sodium salt of 4-phenylazo benzoic acid (ACA, 2 mM). Initially, ACA is in a trans configuration and the OHAC/ACA solution is viscoelastic and exhibits DR (of up to 80% relative to pure water). At the same time, this solution is not effective for heat transfer. Upon UV irradiation, trans-ACA is converted to cis-ACA, and in turn, the solution is converted to its EHT mode (i.e., it loses its viscoelasticity and DR) but it now has a heat-transfer capability comparable to that of water. Subsequent irradiation with visible light reverts the fluid to its viscoelastic DR mode. The above property changes are connected to photoinduced changes in the nanostructure of the fluid. In the DR mode, the OHAC/trans-ACA molecules assemble into long threadlike micelles that impart viscoelasticity and DR capability to the fluid. Conversely, in the EHT mode the mixture of OHAC and cis-ACA forms much shorter cylindrical micelles that contribute to negligible viscoelasticity and effective heat transfer. These nanostructural changes are confirmed by cryo-transmission electron microscopy (cryo-TEM), and the photoisomerization of trans-ACA and cis-ACA is verified by H-1 NMR.