The nucleolus is a nuclear body with multiphase liquid droplets for ribosomal RNA (rRNA) transcription. How rRNA transcription is regulated in the droplets remains unclear. Here, using single-molecule tracking of RNA polymerase I (Pol I) and chromatin-bound upstream binding factor (UBF), we reveal suppression of transcription with phase separation. For transcription, active Pol I formed small clusters/condensates that constrained rDNA chromatin in the nucleolus fibrillar center (FC). Treatment with a transcription inhibitor induced Pol I to dissociate from rDNA chromatin and to move like a liquid within the nucleolar cap that transformed from the FC. Expression of a Pol I mutant associated with a craniofacial disorder inhibited transcription by competing with wild-type Pol I clusters and transforming the FC into the nucleolar cap. The cap droplet excluded an initiation factor, ensuring robust silencing. Our findings suggest a mechanism of rRNA transcription suppression via phase separation of intranucleolar molecules governed by Pol I.