Functional biomolecules, such as RNA, encapsulated inside a protocellular membrane are believed to have comprised a very early, critical stage in the evolution of life, since membrane vesicles allow selective permeability and create a unit of selection enabling cooperative phenotypes. The biophysical environment inside a protocell would differ fundamentally from bulk solution due to the microscopic confinement. However, the effect of the encapsulated environment on ribozyme evolution has not been previously studied experimentally. Here, we examine the effect of encapsulation inside model protocells on the self-aminoacylation activity of tens of thousands of RNA sequences using a high-throughput sequencing assay. We find that encapsulation of these ribozymes generally increases their activity, giving encapsulated sequences an advantage over nonencapsulated sequences in an amphiphile-rich environment. In addition, highly active ribozymes benefit disproportionately more from encapsulation. The asymmetry in fitness gain broadens the distribution of fitness in the system. Consistent with Fisher's fundamental theorem of natural selection, encapsulation therefore leads to faster adaptation when the RNAs are encapsulated inside a protocell during in vitro selection. Thus, protocells would not only provide a compartmentalization function but also promote activity and evolutionary adaptation during the origin of life.