The crowdedness of the cell calls for adequate intracellular organization. Biomolecular condensates, formed by liquid-liquid phase separation of intrinsically disordered proteins and nucleic acids, are important organizers of cellular fluids. To underpin the molecular mechanisms of protein condensation, cell-free studies are often used where the role of crowding is not investigated in detail. Here, we investigate the effects of macromolecular crowding on the formation and material properties of a model heterotypic biomolecular condensate, consisting of nucleophosmin (NPM1) and ribosomal RNA (rRNA). We studied the effect of the macromolecular crowding agent poly(ethylene glycol) (PEG), which is often considered an inert crowding agent. We observed that PEG could induce both homotypic and heterotypic phase separation of NPM1 and NPM1-rRNA, respectively. Crowding increases the condensed concentration of NPM1 and decreases its equilibrium dilute phase concentration, although no significant change in the concentration of rRNA in the dilute phase was observed. Interestingly, the crowder itself is concentrated in the condensates, suggesting that co-condensation rather than excluded volume interactions underlie the enhanced phase separation by PEG. Fluorescence recovery after photobleaching measurements indicated that both NPM1 and rRNA become immobile at high PEG concentrations, indicative of a liquid-to-gel transition. Together, these results provide more insight into the role of synthetic crowding agents in phase separation and demonstrate that condensate properties determined in vitro depend strongly on the addition of crowding agents.