Many biomolecules undergo liquid-liquid phase separation to form liquid-like condensates that mediate diverse cellular functions1,2. Autophagy is able to degrade such condensates using autophagosomes-double-membrane structures that are synthesized de novo at the pre-autophagosomal structure (PAS) in yeast3-5. Whereas Atg proteins that associate with the PAS have been characterized, the physicochemical and functional properties of the PAS remain unclear owing to its small size and fragility. Here we show that the PAS is in fact a liquid-like condensate of Atg proteins. The autophagy-initiating Atg1 complex undergoes phase separation to form liquid droplets in vitro, and point mutations or phosphorylation that inhibit phase separation impair PAS formation in vivo. In vitro experiments show that Atg1-complex droplets can be tethered to membranes via specific protein-protein interactions, explaining the vacuolar membrane localization of the PAS in vivo. We propose that phase separation has a critical, active role in autophagy, whereby it organizes the autophagy machinery at the PAS.