Liquid crystal devices (LCDs) are widely used in several applications involving high-power lasers, such as laser processing, laser shaping, laser communication, laser radar and so on. Investigation on the performance of the LCDs working in high-power laser has always been of concern. In this study, a modified nearly common-path interferometry technique is proposed to investigate the phase modulation characteristics of the LCD irradiated by 1064 nm continuous-wave (CW) laser with Gaussian beam profile and an effective area of 0.1 cm2. In addition, the temperature rise of the LCD induced by laser irradiation was synchronously measured with an infrared thermal imager. A quantitative and dynamic investigation of the relation between the thermal effect caused by the laser and the phase-modulation variation is reported. Experimental results showed that the trend of temperature increase of the LCD was similar to that of phase shift variation. The theoretical phase shift calculated using the temperature-dependent LC refractive index coincided with the experimental results. This indicated that the refractive index change induced by temperature was the main reason for the phase-modulation variation of the LCD under laser irradiation. When the laser power was further increased, interference fringe distortion appeared, and morphological changes in the LC were observed. This implied that the laser-induced temperature rise had reached the clearing point of the LC and that the LCD was inactive. The temperature simulation along the laser incidence direction implied that, under the irradiation CW laser, indium tin oxide (ITO) layer absorbs laser energy, resulting in a temperature rise and a small temperature gradient between the ITO, polyimide (PI) and LC layers. The rising temperature is too low to induced damage of ITO layer and PI layer, but influences the refractive index of the LC. Compared with other layers of the LCD, the LC material will fail first when the irradiated laser power is further risen. The transmission variation of an LCD induced by laser irradiation was found. Possibly owing to the refractive index change of the LC as well as the multilayer film structure of the LCD, there seemed to be a cyclical transmission variation.