Autocatalysis and chemical amplification are characteristic properties of living systems, and they give rise to behaviors such as increased sensitivity, responsiveness, and self-replication. Here we report a synthetic system in which a unique form of compartmentalization leads to nonlinear, autocatalytic behavior. The compartment is a reversibly formed capsule in which a reagent is sequestered. Reaction products displace the reagent from the capsule into solution and the reaction rate is accelerated. The resulting selfregulation is sensitive to the highly selective molecular recognition properties of the capsule.