Low-power cw lasers are employed to study grating formation in blue-phase liquid crystals. We observed that undoped samples exhibit vanishingly small optical nonlinearities whereas methyl-red-dye doped samples produce strong nonlinear self-diffraction effects. The nonlinearities are attributed to director axis reorientation, disorder, and lattice distortion by the laser-excited dye molecules. The magnitude of the observed intensity-dependent index coefficient is in the range of 10(-4)-10(-3) cm2/Watt.