Macroscopic volume shrinkage and swelling of a poly(N-isopropylacrylamide), PNIPA, gel on heating was studied and the microscopic structural change during volume phase transition in water was correlated to variations of size, concentration and size distribution of free volume of the PNIPA gel estimated by positron annihilation lifetime measurement. An average free volume size of 0.28 nm radius of the swollen PNIPA gel coincided with that obtained in pure water below a transition temperature (33 degrees C), whereas, in the collapsed state, two kinds of annihilation lifetimes of ortho-positronium were observed. This result implies that a nanoscopic phase separation occurs maybe because of the newly appeared free volumes of respective sizes, 0.18 nm and 0.33 nm in radius, by decreasing the motility of water molecules, accompanied with an aggregation of the polymer network and a significant expansion of the polymer network mesh size, although the macroscopic volume dramatically decreased. Nanoscopic inhomogeneity was discussed in terms of free volume size distribution. These results suggested that an inhomogeneity of the collapsed gel clearly differs from that of the swollen gel.