It has long been proposed that phase-separated compartments can provide a basis for the formation of cellular precursors in prebiotic environments. However, we know very little about the properties of coacervates formed from simple peptides, their compatibility with ribozymes or their functional significance. Here we assess the conditions under which functional ribozymes form coacervates with simple peptides. We find coacervation to be most robust when transitioning from long homopeptides to shorter, more pre-biologically plausible heteropeptides. We mechanistically show that these RNA–peptide coacervates display peptide-dependent material properties and cofactor concentrations. We find that the interspacing of cationic and neutral amino acids increases RNA mobility, and we use isothermal calorimetry to reveal sequence-dependent Mg²⁺ partitioning, two critical factors that together enable ribozyme activity. Our results establish how peptides of limited length, homogeneity and charge density facilitate the compartmentalization of active ribozymes into non-gelating, magnesium-rich coacervates, a scenario that could be applicable to cellular precursors with peptide-dependent functional phenotypes. [Figure not available: see fulltext.].