We propose a novel phase separation method, referred to as isomerization-induced phase separation (IIPS), applicable to a mixture comprising monomers, nematic liquid crystal (LC), and azobenzene LC (azo-LC). The resulting structures, termed as monomer-dispersed gel LCs (MDGLCs), can be formed by both dark IIPS and bright IIPS, which indicates that IIPS occurs without and with light irradiation, respectively. The MDGLC structures in a cell are reconstructed, indicating that the IIPS is a repeatable phase separation process. A cell filled with the mixture initially exhibits a scattering mode and can be switched to multi-stable transparent states after UV irradiation. The switchability is due to the isothermal phase transition resulting from trans- to cisisomerization processes. An application of the IIPS on an optically controllable scattering mode light shutter, having the advantages of multi-stability, optically switchability, polarizer-free, with high contrast ratio, and other properties, is experimentally demonstrated. Conversely, the transparent mode of MDGLCs can be switched back to the scattering mode by green-light illumination to achieve bright IIPS, or by thermal treatment. Grayscales (multi-stable states) can also be elicited by UV illumination under various durations. The selectively unpolymerized monomer and azo-LC in this system are the keys to achieve high-performance multi-stable scattering MDGLCs.