The solubilization behavior of nile red dye in aqueous surfactant and micellar solutions was studied by optical spectroscopic techniques, dynamic light scattering, and atomic force microscopy. Nile red exhibits considerable absorption in the submicellar concentration region. When dispersed in aqueous surfactant and/or micellar solution, nile red molecules tend to form nonemissive dimers and/or H-type aggregates through π–π stacking interactions. This phenomenon may limit the use of nile red in solubilization studies. In the presence of ionic SDS and CTAB micelles, the solubilization of nile red appears to take place primarily at the charged micellar surface within the interfacial region. Similarly, spectra in micellar solution of nonionic Triton X-100 revealed that nile red dye penetrates the hydrophilic, interfacial poly(oxyethylene) region of the micelles but cannot reach the hydrophobic, innermost core. Our results therefore suggest that nile red dye must be chosen carefully when probing (micellar) hydrophobic environments and (micro)domains.