Monitoring spatial distribution of chemicals in microfluidic devices by using traditional sensors is a challenging task. In this paper, we report utilization of a thin layer of cholesteric liquid crystal for monitoring ethanol inside microfluidic channels. This thin layer can be either a polymer dispersed cholesteric liquid crystal (PDCLC) layer or a free cholesteric liquid crystal (CLC) layer separated from the microfluidic device by using a thin film of PDMS. They both show visible colorimetric responses to 4% of ethanol solution inside the microfluidic channels. Moreover, the spatial distribution of ethanol inside the microfluidic channel can be reflected as a color map on the CLC sensing layers. By using this device, we successfully detected ethanol produced from fermentation taking place inside the microfluidic channel. These microfluidic channels with embedded PDCLC or embedded CLC offer a new sensing solution for monitoring volatile organic compounds in microfluidic devices.