RNA granules are non-membrane bound cellular compartments that contain RNA and RNA binding proteins. The molecular mechanisms that regulate the spatial distribution of RNA granules in cells are poorly understood. During polarization of the C. elegans zygote, germline RNA granules, called P granules, assemble preferentially in the posterior cytoplasm. We present evidence that P granule asymmetry depends on RNA-induced phase separation of the granule scaffold MEG-3. MEG-3 is an intrinsically disordered protein that binds and phase separates with RNA in vitro. In vivo, MEG-3 forms a posterior-rich concentration gradient that is anti-correlated with a gradient in the RNA-binding protein MEX-5. MEX-5 is necessary and sufficient to suppress MEG-3 granule formation in vivo, and suppresses RNA-induced MEG-3 phase separation in vitro. Our findings support a model whereby MEX-5 functions as an mRNA sink to locally suppress MEG-3 phase separation and drive P granule asymmetry.