The transport properties of colloidal particles in active liquids have been studied extensively. It has led to a deeper understanding of the interactions between passive and active particles. However, the phase behavior of colloidal particles in active media has received little attention. Here, we present a combined experimental and numerical investigation of passive colloids dispersed in suspensions of active particles. Our study reveals dynamic clustering of colloids in active media due to an interplay of activity and attractive effective potential between the colloids. The strength of the effective potential is set by the size ratio of passive particles to the active ones. As the relative size of the passive particles increases, the effective potential becomes stronger and the average size of the clusters grows. The simulations reveal a macroscopic phase separation at sufficiently large size ratios. We will discuss the effect of density fluctuations of active particles on the nature of effective interactions between passive ones.