The compartmentalization of cell-free gene expression systems in liposomes provides an attractive route to the formation of protocells, but these models do not capture the physical (crowded) environment found in living systems. Here, we present a microfluidics-based route to produce monodisperse liposomes that can shrink almost 3 orders of magnitude without compromising their stability. We demonstrate that our strategy is compatible with cell-free gene expression and show increased protein production rates in crowded liposome protocells.