Background Most cellular processes are carried out by multi-protein complexes, groups of proteins that bind together to perform a specific task. Some proteins form stable complexes, while other proteins form transient associations and are part of several complexes at different stages of a cellular process. A better understanding of this higher-order organization of proteins into overlapping complexes is an important step towards unveiling functional and evolutionary mechanisms behind biological networks. Results We propose a new method for identifying and representing overlapping protein complexes (or larger units called functional groups) within a protein interaction network. We develop a graph-theoretical framework that enables automatic construction of such representation. We illustrate the effectiveness of our method by applying it to TNFα/NF-κB and pheromone signaling pathways. Conclusion The proposed representation helps in understanding the transitions between functional groups and allows for tracking a protein's path through a cascade of functional groups. Therefore, depending on the nature of the network, our representation is capable of elucidating temporal relations between functional groups. Our results show that the proposed method opens a new avenue for the analysis of protein interaction networks.