We report a new approach for differentiating structurally related analytes using a liquid crystal (LC) based system. In this work we have combined two principles (analyte‐surfactant interactions and host‐guest inclusion) at LC/aqueous interface to differentiate structurally related analytes methyl red (MR) and methyl orange (MO). On introducing MR/MO in aqueous solution containing sodium dodecyl sulfate (SDS), the optical response of 4‐cyano‐4′‐pentylbiphenyl (5CB) changes from dark to bright in presence of MR but remains same in the presence of MO. This observation implies interaction of analyte (MR) and surfactant (SDS), thus effectively displacing SDS adsorbed at the 5CB/aqueous interface. Further, competitive inclusion complex formation of β‐cyclodextrin (β‐CD) with SDS or with analyte (dye, MR/MO) was visualized through changes in the optical response of 5CB at SDS‐laden 5CB/aqueous interface. On addition of MR/MO to the SDS‐β‐CD complex solution the optical response of 5CB changes from bright to dark in presence of MO but remains same in the presence of MR. This implicates that homeotropic orientation of 5CB resulted due to the reorganization of displaced SDS molecules from β‐CD cavity at the 5CB/aqueous interface. Overall, this LC based system demonstrates differentiation of structurally related analytes in the absence and presence of β‐CD.