Langmuir monolayer studies combined with fluorescence microscopy provide powerful insights into the phase behavior of cholesterol and cholesterol analogue/phospholipid monolayer systems at the air-water interface. These studies have established the ability of cholesterol and similar molecules to condense the average molecular area of the monolayer as well as to laterally organize the monolayer into sterol-rich and sterol-poor regions. Oxysterols are one class of molecules that deserve particular attention due to their metabolic and physical effects on the membrane and the functioning of mammalian cells. We systematically explore the miscibility of 25-hydroxycholesterol (25OH) with 1,2-dimyristoyl-sn-glycero-3-phosphocholine (DMPC) in lipid monolayers. Like cholesterol, the 25OH/DMPC system exhibits phase separation; however, due to the difunctional nature of 25OH, there are significant differences. Using fluorescence microscopy and traditional Langmuir techniques, we investigate the average molecular packing and micron scale phase separation within a 25OH/phospholipid monolayer. We present evidence of the nucleation and growth of domain formation, the expansion of the monolayer induced by 25OH, and a model to describe our results. We conclude that 25OH and other similar hydroxysterols provide a useful and independent test of cholesterol's behavior within monolayer leaflets.