Aqueous two-phase systems and related emulsion-based structures defined within micro- and nanoscale environments enable a bottom-up synthetic biological approach to mimicking the dynamic compartmentation of biomaterial that naturally occurs within cells. Model systems we have developed to aid in understanding these phenomena include on-demand generation and triggering of reversible phase transitions in ATPS confined in microscale droplets, morpho-logical changes in networks of femtoliter-volume aqueous droplet interface bilayers (DIBs) formulated in microfluidic channels, and temperature-driven phase transitions in interfacial lipid bilayer systems supported on micro and nanostructured substrates. For each of these cases, the dynamics were intimately linked to changes in the chemical potential of water, which becomes increasingly susceptible to confinement and crowding. At these length scales, where interfacial and surface areas predominate over compartment volumes, both evaporation and osmotic forces become enhanced relative to ideal dilute solutions. Consequences of confinement and crowding in cell-sized microcompartments for increasingly complex scenarios will be discussed, from single-molecule mobility measurements with fluorescence correlation spectroscopy to spatio-temporal modulation of resource sharing in cell-free gene expression bursting.