Liquid-liquid phase separation (LLPS) can drive formation of diverse and essential macromolecular structures, including those specified by viruses. Kaposi's Sarcoma-Associated Herpesvirus (KSHV) genomes associate with the viral encoded Latency-Associated Nuclear Antigen (LANA) to form stable nuclear bodies (NBs) during latent infection. Here, we show that LANA-NB formation and KSHV genome conformation involves LLPS. Using LLPS disrupting solvents, we show that LANA-NBs are partially disrupted, while DAXX and PML foci are highly resistant. LLPS disruption altered the LANA-dependent KSHV chromosome conformation but did not stimulate lytic reactivation. We found that LANA-NBs undergo major morphological transformation during KSHV lytic reactivation to form LANA-associated replication compartments encompassing KSHV DNA. DAXX colocalizes with the LANA-NBs during latency but is evicted from the LANA-associated lytic replication compartments. These findings indicate the LANA-NBs are dynamic super-molecular nuclear structures that partly depend on LLPS and undergo morphological transitions corresponding to the different modes of viral replication.