Peptide-based liquid-liquid phase separated domains, or coacervates, are a biomaterial gaining new interest due to their exciting potential in fields ranging from biosensing to drug delivery. In this study, we demonstrate that coacervates provide a simple and biocompatible medium to improve nucleic acid biosensors through the sequestration of both the biosensor and target strands within the coacervate, thereby increasing their local concentration. Using the well-established polyarginine (R9) - ATP coacervate system and an energy transfer-based DNA molecular beacon we observed three key improvements: i) a greater than 20-fold reduction of the limit of detection within coacervates when compared to control buffer solutions; ii) an increase in the kinetics, equilibrium was reached more than 4-times faster in coacervates; and iii) enhancement in the dye fluorescent quantum yields within the coacervates, resulting in greater signal-to-noise. The observed benefits translate into coacervates greatly improving bioassay functionality.