A system of aggregation equations describing nonlocal interaction of two species is studied. When interspecies repulsive forces dominate intra-species repulsion, phase segregation may occur. This leads to the formation of distinct phase domains, separated by moving interfaces.The one dimensional interface problem is formulated variationally, and conditions for existence and nonexistence are established. The singular limit of large and short-ranged repulsion in two dimensions is then considered, leading to a two-phase free boundary problem describing the evolution of phase interfaces. Long term dynamics are investigated computationally, demonstrating coarsening phenomenon quantitatively different from classical models of phase separation. Finally, the interplay between long-range interspecies attraction and interfacial energy is illustrated, leading to pattern formation.