The conserved yeast E3 ubiquitin ligase Bre1 and its partner, the E2 ubiquitin-conjugating enzyme Rad6, monoubiquitinate histone H2B across gene bodies during the transcription cycle1. Although processive ubiquitination might—in principle—arise from Bre1 and Rad6 travelling with RNA polymerase II2, the mechanism of H2B ubiquitination across genic nucleosomes remains unclear. Here we implicate liquid–liquid phase separation3 as the underlying mechanism. Biochemical reconstitution shows that Bre1 binds the scaffold protein Lge1, which possesses an intrinsically disordered region that phase-separates via multivalent interactions. The resulting condensates comprise a core of Lge1 encapsulated by an outer catalytic shell of Bre1. This layered liquid recruits Rad6 and the nucleosomal substrate, which accelerates the ubiquitination of H2B. In vivo, the condensate-forming region of Lge1 is required to ubiquitinate H2B in gene bodies beyond the +1 nucleosome. Our data suggest that layered condensates of histone-modifying enzymes generate chromatin-associated ‘reaction chambers’, with augmented catalytic activity along gene bodies. Equivalent processes may occur in human cells, and cause neurological disease when impaired.