Biodiesel is produced from various vegetable oils via a transesterification reaction. Emulsification of biodiesel during the transesterification reaction can occur, however, if free fatty acids are present in the feedstock oil. The emulsified product is not usable. Here we report a facile method using a liquid crystal (LC)-based sensing platform for detection of free fatty acids in oils at levels (1wt%) relevant to biodiesel production. The approach involves the partitioning of fatty acid (doped into LC) to an aqueous-LC interface and an associated anchoring transition of the LC, leading to an optical read-out. Unlike other methods for detection of fatty acids (e.g, pH), this approach directly measures interfacial activity of fatty acids that underlies emulsion stability. We describe the influence of the molecular structures and concentrations of fatty acids, and the solution condition (pH), on fatty acid-triggered ordering transitions of LCs.