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.