Intracellular compartments are necessary for the regulation of many biochemical processes that ensure cell survival, growth and proliferation. Compartmentalisation is commonly achieved in organelles with defined lipid membranes, such as mitochondria, endoplasmic reticulum or the Golgi apparatus. While these organelles are responsible for many localised biochemical processes, recent evidence points to another class of compartments that lack membrane boundaries. The structure and content of these bodies depend on their function and subcellular localisation, but they mainly incorporate proteins and RNA. Examples of these ribonucleoprotein bodies (RNPBs) include eukaryotic mRNA processing bodies (P-bodies) and stress granules (SGs). While most of these structures have been widely studied for their capacity to bind, store and process mRNAs under different conditions, their biological functions and physical properties are poorly understood. Recent intriguing data suggest that liquid–liquid phase separation (LLPS) represents an important mechanism seeding the formation and defining the function of RNPBs. In this review, we discuss how LLPS is transforming our ideas about the biological functions of SGs and P-bodies and their link to diseases.