We report a study of the interactions of proteins with monolayers of phospholipids (D/L-alpha-dipalmitoyl phosphatidylcholine and L-alpha-dilauroyl phosphatidylcholine) spontaneously assembled at an interface between an aqueous phase and a 20-mu m-thick film of a nematic liquid crystal (4'-pentyl-4-cyanobiphenyl). Because the orientation of the liquid crystal is coupled to the organization of the lipids, specific interactions between phospholipase A(2) and the lipids (binding and/or hydrolysis) that lead to reorganization of the lipids are optically reported (using polarized light) as dynamic orientational transitions in the liquid crystal. In contrast, nonspecific interactions between proteins such as albumin, lysozyme, and cytochrome-c and the lipid-laden interface of the liquid crystal are not reported as orientational transitions in the liquid crystals. Concurrent epifluorescence and polarized light imaging of labeled lipids and proteins at the aqueous-liquid crystal interface demonstrate that spatially patterned orientations of the liquid crystals observed during specific binding of phospholipase A(2) to the interface, as well as during the subsequent hydrolysis of lipids by phospholipase A(2), reflect the lateral organization (micrometer-sized domains) of the proteins and lipids, respectively, at the aqueous-liquid crystal interface.