Dynamics of photopolymerization-induced phase separation (PIPS) and morphology development in mixtures of low molar mass nematic liquid crystal (LC) 4-n-heptyl-4＇-cyanobiphenyl (designated K21) and photocuratives (designated NOA65) have been investigated by means of optical microscopy, light scattering, and differential scanning calorimetry. The equilibrium phase diagram of the LC/monomer (uncured NOA65) system was first established theoretically on the basis of the Flory-Huggins/Maier-Saupe theory. The calculated phase diagram displayed isotropic, liquid + liquid, liquid + nematic, and pure nematic coexistence regions in conformity with experiment. The effect of photopolymerization on the phase diagram was examined through comparison of the calculated phase diagrams of LC/linear polymer with LC/cross-linked polymer mixtures. Photopolymerization of the LC/monomer mixtures resulted in phase separation due to instability caused by an increase in molecular weight and subsequent network formation. Photopolymerization initiated in the isotropic phase gave uniformly distributed polygonal-shaped LC droplets in contrast to photopolymerization initiated in the two-phase region. Of particular interest is that the size of the phase-separated LC droplet increases with LC concentration. The network morphology is reminiscent of an interconnected thread seemingly running through the interstices of the polygonal droplets. Temporal evolution of structure factors was analyzed in the context of dynamical scaling law.