In our previous study, ethylcellulose (EC), an effective, nontoxic, and biodegradable natural polymer, was found effective in dewatering water-in-diluted bitumen emulsions. In this study, the demulsification mechanism of water-in-diluted bitumen emulsions by EC is investigated. In situ experiments using a micropipet apparatus provided direct evidence on both flocculation and coalescence of water droplets in diluted bitumen by EC. The addition of EC was found to decrease naphtha-diluted bitumen-water interfacial tension significantly. At the molecular level, AFM imaging revealed disruption of the continuous interfacial films formed from surface-active components of bitumen by EC. Our study clearly indicates that the demulsification by EC is through both flocculation and coalescence of water droplets, attained by competitive adsorption of EC at the oil-water interface and disruption of the original protective interfacial films formed from the surface-active components of bitumen.