To identify the neural constituents responsible for generating polarized light changes, we created spatially resolved movies of propagating action potentials from stimulated lobster leg nerves using both reflection and transmission imaging modalities. Changes in light polarization are associated with membrane depolarization and provide sub-millisecond temporal resolution. Typically, signals are detected using light transmitted through tissue; however, because we eventually would like to apply polarization techniques in-vivo, reflected light is required. In transmission mode, the optical signal was largest throughout the center of the nerve, suggesting that most of the optical signal arose from the inner nerve bundle. In reflection mode, polarization changes were largest near the edges, suggesting that most of the optical signal arose from the outer sheath. In support of these observations, an optical model of the tissue showed that the outer sheath is more reflective while the inner nerve bundle is more transmissive. In order to apply these techniques in-vivo, we must consider that brain tissue does not have a regular orientation of processes as in the lobster nerve. We tested the effect of randomizing cell orientation by tying the nerve in an overhand knot prior to imaging, producing polarization changes that can be imaged even without regular cell orientations.