It is clear that a crowded environment influences the structure, dynamics, and interactions of biological molecules, but the complexity of this phenomenon demands the development of new experimental and theoretical approaches. Here we use two complementary single-molecule FRET techniques to show that the kinetics of DNA base pairing and unpairing, which are fundamental to both the biological role of DNA and its technological applications, are strongly modulated by a crowded environment. We directly observed single DNA hairpins, which are excellent model systems for studying hybridization, either freely diffusing in solution or immobilized on a surface under crowding conditions. The hairpins followed two-state folding dynamics with a closing rate increasing by 4-fold and the opening rate decreasing 2-fold, for only modest concentrations of crowder [10% (w/w) polyethylene glycol (PEG)]. These experiments serve both to unambiguously highlight the impact of a crowded environment on a fundamental biological process, DNA base pairing, and to illustrate the benefits of single-molecule approaches to probing the structure and dynamics of complex biomolecular systems.