Macromolecular condensation resulting from biologically regulated liquid-liquid phase separation is emerging as a mechanism to organize intracellular space in eukaryotes, with broad implications for cell physiology and pathology. Despite their small size, bacterial cells are also organized by proteins such as FtsZ, a tubulin homolog that assembles into a ring structure precisely at the cell midpoint and is required for cytokinesis. Here, we demonstrate that FtsZ can form crowding-induced condensates, reminiscent of those observed for eukaryotic proteins. Formation of these FtsZ-rich droplets occurs when FtsZ is bound to SlmA, a spatial regulator of FtsZ that antagonizes polymerization, while also binding to specific sites on chromosomal DNA. The resulting condensates are dynamic, allowing FtsZ to undergo GTP-driven assembly to form protein fibers. They are sensitive to compartmentalization and to the presence of a membrane boundary in cell mimetic systems. This is a novel example of a bacterial nucleoprotein complex exhibiting condensation into liquid droplets, suggesting that phase separation may also play a functional role in the spatiotemporal organization of essential bacterial processes.