Measurement-based quantum computing relies on the rapid creation of large-scale entanglement in a register of stable qubits. Atomic arrays are well suited to store quantum information, and entanglement can be created using highly-excited Rydberg states. Typically, isolating pairs during gate operation is difficult because Rydberg interactions feature long tails at large distances. Here, we engineer distance-selective interactions that are strongly peaked in distance through off-resonant laser coupling of molecular potentials between Rydberg atom pairs. Employing quantum gas microscopy, we verify the dressed interactions by observing correlated phase evolution using many-body Ramsey interferometry. We identify atom loss and coupling to continuum modes as a limitation of our present scheme and outline paths to mitigate these effects, paving the way towards the creation of large-scale entanglement.