β-Arrestins 1 and 2 are multifunctional adaptor proteins1 that regulate the signalling of G-protein-coupled receptors (GPCRs), the largest class of receptors, which impact nearly all aspects of physiology and are one of the most common drug targets2. Although β-arrestins interact with a wide array of signalling effectors at many GPCRs, it is unclear how β-arrestins promote such varied functions. Here we show that β-arrestins undergo liquid–liquid phase separation, forming condensates that regulate GPCR function. We show that condensation is specific to visual arrestins and β-arrestins, and demonstrate that β-arrestin oligomerization occurs in proximity to the GPCR to regulate GPCR functions such as internalization and signalling. Our work provides a paradigm for β-arrestin condensates as regulators of GPCR function, with liquid–liquid phase separation serving as an important promoter of signalling compartmentalization at GPCRs.