Liquid-liquid phase transitions in complex mixtures of proteins and other molecules produce crowded compartments supporting in vitro transcription and translation. We developed a method based on picoliter water-in-oil droplets to induce coacervation in Escherichia coli cell lysate and follow gene expression under crowded and noncrowded conditions. Coacervation creates an artificial cell-like environment in which the rate of mRNA production is increased significantly. Fits to the measured transcription rates show a two orders of magnitude larger binding constant between DNA and T7 RNA polymerase, and five to six times larger rate constant for transcription in crowded environments, strikingly similar to in vivo rates. The effect of crowding on interactions and kinetics of the fundamental machinery of gene expression has a direct impact on our understanding of biochemical networks in vivo. Moreover, our results show the intrinsic potential of cellular components to facilitate macromolecular organization into membranefree compartments by phase separation.microdroplets | macromolecular crowding P rotocells are minimal compartmentalized systems exhibiting key characteristics of cellular function, including metabolism and replication (1, 2). Lipid vesicles are considered the prototypical protocell as they can form functional microscopic spherical assemblies suited for in vitro gene expression (3, 4). Compartmentalization via lipid bilayers is considered essential for the emergence of cells (4), but there are alternative models based on liquid-liquid phase transitions that lead to the emergence of compartments (5, 6). Compartmentalization is but one characteristic, as protocells ideally also mimic the highly crowded interior of living cells, which have total macromolecule concentrations in excess of 300 g/L (7). Examples in which compartmentalization and high local concentrations are obtained concurrently, include DNA brushes (8), aqueous two-phase systems (9), and liquid coacervates (10). Phase separation or coacervation occurs in a wide range of polymer and protein solutions, often triggered by changes in temperature or salt concentration, or by the addition of coacervating agents (11). The (complex) coacervate droplets that are formed in such systems present macromolecularly crowded, aqueous, physical compartments, 1-100 μm in diameter (12). Recent work has identified similar liquid phase transitions in vivo in the formation of intracellular non-membrane-bound compartments exhibiting liquid-like properties, slowed down diffusion, and strongly interacting macromolecular components (13,14). Well-studied examples are the intracellular localization of DNA or RNA and proteins in Cajal bodies, P granules, and nucleoli (15-17), which can contain over 100 components. Such complexity has not been achieved in two-phase systems in vitro (18,19). Although the physics of coacervates is well understood, progress in their development as protocell models has stalled, because of the lack of demonstrations of complex biochemical proce...