The spatial organization of DNA involves DNA loop extrusion and the formation of protein-DNA condensates. While the significance of each process is increasingly recognized, their interplay remains unexplored. Using molecular dynamics simulation and theory we investigate this interplay. Our findings reveal that loop extrusion can enhance the dynamics of condensation and promotes coalescence and ripening of condensates. Further, the DNA loop enables condensate formation under DNA tension and position condensates. The concurrent presence of loop extrusion and condensate formation results in the formation of distinct domains similar to TADs, an outcome not achieved by either process alone.