Plants sense and respond to hyperosmotic stress via quick activation of sucrose nonfermenting 1–related protein kinase 2 (SnRK2). Under unstressed conditions, the protein phosphatase type 2C (PP2C) in clade A interact with and inhibit SnRK2s in subgroup III, which are released from the PP2C inhibition via pyrabactin resistance 1–like (PYL) abscisic acid receptors. However, how SnRK2s are released under osmotic stress is unclear. Here, we outline how subgroup I SnRK2s sense molecular crowding to interrupt PP2C-mediated inhibition in plants. Severe hyperosmotic stress triggers condensate formation to activate the subgroup I SnRK2s, which requires their intrinsically disordered region. PP2Cs interact with and inhibit subgroup I SnRK2s, and this interaction is disrupted by phase separation of SnRK2s. The subgroup I SnRK2s are critical for severe osmotic stress responses. Our findings elucidate a mechanism for how macromolecular crowding is sensed in plants and demonstrate that physical separation of signaling molecules can segregate negative regulators to initiate signaling.