Numerous small proteins have been discovered across all domains of life, among which many are hydrophobic and predicted to localize to the cell membrane. Based on a few that are well-studied, small membrane proteins are regulators involved in various biological processes, such as cell signaling, nutrient transport, drug resistance, and stress response. However, the function of most recently identified small membrane proteins remains elusive. Their small size and hydrophobicity make protein production challenging, hindering function discovery. Here, we combined a cell-free system with lipid sponge droplets and synthesized small membrane proteins in vitro. Lipid sponge droplets contain a dense network of lipid bilayers, which accommodates and extracts newly synthesized small membrane proteins from the aqueous surroundings. Using small bacterial membrane proteins MgrB and SafA as proof of principle, we showed that the in vitro produced membrane proteins reached sufficient concentrations for downstream analysis, and more importantly, they are functionally active. The cell-free system was also suitable for synthesizing other small membrane proteins, including one from human, indicating its high level of versatility. Furthermore, we showed that small proteins produced in this system can be used for in vitro pull-down assays to identify interaction partners. This work presents a robust alternative approach for producing small membrane proteins, which may aid their function discovery in all domains of life.