Holographic surface relief gratings (SRGs) were fabricated on composite films assembled by electrostatic layer-by-layer (ELBL) deposition of a polyelectrolyte, poly(dimethyl diallylammonium chloride) (PDAC), and an azo dye, Congo Red (CR). Surface modulation and first-order diffraction efficiency of the SRG were found to increase with the thickness of the PDAC/CR films. Polarized absorption spectra indicated an oriented growth of CR on the PDAC film. Analysis of the film thickness, FTIR, and FT-Raman results confirmed that the electrostatic attraction between CR and PDAC, as well as the pi-pi interaction between CR chromophores resulting in the formation of J aggregates, lead to formation of PDAC/CR composite films. Photochemical changes of the PDAC/CR films after irradiation were investigated by W-vis absorption, FTIR, and FT-Raman spectroscopy. The results indicate that in addition to trans double left right arrow cis photoisomerization of CR in the composite film, an irreversible photochemical degradation of CR also simultaneously occurs. Recording SRG on PDAC/CR films by s- and p-polarized beams show different behavior compared to spin-coated films of polymers containing functionalized azo chromophores. Our results indicate that the volume collapse due to the photodegradation of CR in the polymeric matrix, as well as gradient force-induced migration due to trans double left right arrow cis isomerization cycling of CR contribute to the formation of SRG on the composite films. This approach provides a methodology to fabricate SRGs for optical information storage applications by using the facile ELBL technique to assemble commercially available azo dyes and polyelectrolytes.