Bacterial microcompartments are substrate specific metabolic modules that are conditionally expressed in certain bacterial species. These all protein structures have size in the range of 100-150 nm and are formed by the self-assembly of thousands of protein subunits, all encoded by genes belonging to a single operon. The operon contains genes that encode for both enzymes and shell proteins. The shell proteins self-assemble to form the outer coat of the compartment and enzymes are encapsulated within. A perplexing question in MCP biology is to understand the mechanism which governs the formation of these small yet complex assemblages of proteins. In this work we use 1,2-propanediol utilization microcompartments (PduMCP) as a paradigm to identify the factors that drive the self-assembly of MCP proteins. We find that a major shell protein PduBB tend to self-assemble under macromolecular crowded environment and suitable ionic strength. Microscopic visualization and biophysical studies reveal phase separation to be the principle mechanism behind the self-association of shell protein in the presence of salts and macromolecular crowding. The shell protein PduBB interacts with the enzyme diol-dehydratase PduCDE and co-assemble into phase separated liquid droplets. The co-assembly of PduCDE and PduBB results in the enhancement of catalytic activity of the enzyme. A combination of spectroscopic and biochemical techniques shows the relevance of divalent cation Mg2+ in providing stability to intact PduMCP in vivo. Together our results suggest a combination of protein-protein interactions and phase separation guiding the self-assembly of Pdu shell protein and enzyme in solution phase.