RNA performs important cellular functions in contemporary life forms. Its ability to act both as a catalyst and a storage mechanism for genetic information is also an important part of the RNA world hypothesis. Compartmentalization within modern cells allows the local concentration of RNA to be controlled and it has been suggested that this was also important in early life forms. Here, we mimic intracellular compartmentalization and macromolecular crowding by partitioning RNA in an aqueous two-phase system (ATPS). We show that the concentration of RNA is enriched by up to 3,000-fold in the dextran-rich phase of a polyethylene glycol/dextran ATPS and demonstrate that this can lead to approximately 70-fold increase in the rate of ribozyme cleavage. This rate enhancement can be tuned by the relative volumes of the two phases in the ATPS. Our observations support the importance of compartmentalization in the attainment of function in an RNA World as well as in modern biology.