A large optical nonlinearity has been observed for the photo-responsive liquid crystals under the condition that the nematic phase is close to the isotropic condition. The direct observation of the photo-response of a liquid crystal by the time-resolved transient grating phase imaging technique revealed that the optical nonlinearity was caused by the transiently generated phase formed inside the photo-induced isotropic region. A shock-like flow was observed for the formation of the transiently generated phase. Based on the theoretical calculation, we propose that a flow generated at the disordered/ordered interface induced the reorientation of the liquid crystal molecules, thereby generating a larger polarization and ultimately causing the optical nonlinearity.