Binary colloids of inorganic nanosheets prepared by exfoliation of two different layered crystals form phase-separated structures with demixing of the two nanosheets. The phase-separated colloids of photocatalytic niobate and photochemically inert clay nanosheets exhibit unusual photochemical reactions based on the phase-separated structure. The present paper reports photocatalytic decomposition of a cyanine dye in this binary colloid, where the dye is selectively adsorbed on the clay nanosheets to be spatially separated from the photocatalytic nanosheets. Upon UV irradiation, the dye is photocatalytically decomposed in the colloids containing the niobate nanosheets, but self-photolysis of the dye is observed in the colloid lacking the photocatalytic nanosheets. Faster decomposition in nitrogen than in air suggests contribution of the conduction-band electrons generated in the niobate nanosheets to the photocatalytic reaction. In the binary colloid, the degradation is retarded compared with the single-component niobate colloid. Larger clay content more stabilized the dye against the decomposition. In contrast, irradiation of the colloids with visible light causes self-photolysis of the dye even in the presence of the niobate nanosheets, indicating the absence of electron transfer from the photoexcited dye to the photocatalytic nanosheets.