Cells operate in part by compartmentalizing chemical reactions. For example, recent work has shown that chromatin, the material that contains the cell's genome, can auto-regulate its structure by utilizing reaction products (proteins, RNA) to compartmentalize biomolecules via liquid–liquid phase separation (LLPS). Here, we develop a model biomolecular system that enables quantitative investigation of the physical mechanisms involved, particularly by coupling a phase-separating system of DNA nanostars to an in vitro transcription reaction. The DNA nanostars’ sequence is designed such that they self-assemble into liquid droplets only in the presence of a transcribed single-stranded RNA linker. We find that nanostar droplets form with a substantial delay and non-linear response to the kinetics of RNA synthesis. In addition, we utilize the compartments generated by the phase-separation process to engineer an activator/repressor network, where the formation of droplets is activated by the transcription reaction, and then droplets suppress the transcription reaction by segregating transcription components inside droplets. Our work on transcription-driven liquid–liquid phase separation constitutes a robust and programmable platform to explore non-equilibrium reaction-phase transition dynamics and could also provide a foundation to understand the dynamics of transcriptional condensate assembly in cells.