The surfactant system tetradecyldimethylamine oxide (TDMAO)/benzyl alcohol/water has been studied. In the phase diagram of this ternary system a large isotropic region is encountered that connects the water corner to the benzyl alcohol corner. This isotropic phase has been investigated in some detail by means of electric conductivity, viscosity, electric birefringence, and small-angle neutron scattering (SANS) measurements. From these experiments it can be concluded that for roughly equal amounts of alcohol and water a bicontinuous structure is present, similar to that typically observed for bicontinuous microemulsions. The structural units present become continuously smaller with increasing alcohol content, and at very high alcohol content only small reverse aggregates are present. The formation of this bicontinuous phase can be understood by the fact that the presence of the benzyl alcohol reduces the stiffness of the surfactant film, and therefore such a "sponge"-type structure is favored. With increasing surfactant concentration the amphiphilic film becomes stiffer again, which leads to the formation of a lamellar phase. The corresponding phase boundary is exactly related to the amphiphilicity factor as it can be deduced from the scattering experiments. Copyright 1998 Academic Press.