A method is described for making a liquid crystal composite in which droplets of a liquid crystal material dispersed in a matrix material. An encapsulating material at least partially separates the liquid crystal material from the matrix material. This construction permits the matrix material to be selected on the basis of its processing and environmental properties and the encapsulating material to be selected on the basis of its emulsifying ability and orientational interactions with liquid crystal material. Light valves made from such a composite exhibit improved electro-optical properties.