Understanding the dynamics of complex enzymatic reactions in highly crowded small volumes is crucial for the development of synthetic minimal cells. Compartmentalized biochemical reactions in cell-sized containers exhibit a degree of randomness due to the small number of molecules involved. However, it is unknown how the physical environment contributes to the stochastic nature of multistep enzymatic processes. Here, we present a robust method to quantify gene expression noise in vitro using droplet microfluidics. We study the changes in stochasticity in the cell-free gene expression of two genes compartmentalized within droplets as a function of DNA copy number and macromolecular crowding. We find that decreased diffusion caused by a crowded environment leads to the spontaneous formation of heterogeneous microenvironments of mRNA as local production rates exceed the diffusion rates of macromolecules. This heterogeneity leads to a higher probability of the molecular machinery staying in the same microenvironment, directly increasing the system's stochasticity.