In this paper, we report the formation and transformation of graphene oxide (GO) liquid crystalline (LC) structures in the synthesis and deformation of tough GO nanocomposite hydrogels. GO aqueous dispersions form a nematic LC phase, while the addition of poly(N-vinylpyrrolidone) (PVP) and acrylamide (AAm), which are capable of forming hydrogen bonding with GO nanosheets, shifts the isotropic/nematic transition to a lower volume fraction of GO and enhances the formation of nematic droplets. During the gelation process, a phase separation of the polymers and GO nanosheets is accompanied by the directional assembly of GO nanosheets, forming large LC tactoids with a radial GO configuration. The shape of the large tactoids evolves from a sphere to a toroid as the tactoids increase in size. Interestingly, during cyclic uniaxial tensile deformation a reversible LC transition is observed in the very tough hydrogels. The isolated birefringent domains and the LC domains in the tactoids in the gels are highly oriented under a high tensile strain.