Catalyzed polymerization reactions represent a primary anabolic activity of all cells. It can be assumed that early cells carried out such reactions, in which macromolecular catalysts were encapsulated within some type of boundary membrane. In the experiments described here, we show that a template-independent RNA polymerase (polynucleotide phosphorylase) can be encapsulated in dimyristoyl phosphatidylcholine vesicles without substrate. When substrate adenosine diphosphate (ADP) was provided externally, long-chain RNA polymers were synthesized within the vesicles. Substrate flux was maximized by maintaining the vesicles at the phase transition temperature of the component lipid. A protease was introduced externally as an additional control. Free enzyme was inactivated under identical conditions. RNA products were visualized in situ by ethidium bromide flourescence. The products were harvested from the liposomes, radiolabeled, and analyzed by polyacrylamide gel electrophoresis. Encapsulated catalysts represent a model for primitive cellular systems in which an RNA polymerase was entrapped within a protected microenvironment.