A long-standing question in metazoan gene regulation is how remote enhancers communicate with their target promoters over long distances. Combining genome editing and quantitative live imaging we simultaneously visualize physical enhancer-promoter communication and transcription in Drosophila embryos. Enhancers regulating pair rule stripes of even-skipped expression activate transcription of a reporter gene over a distance of 150 kb. We show in individual cells that activation only occurs after the enhancer comes into close proximity with its regulatory target and that upon dissociation transcription ceases almost immediately. We further observe distinct topological conformations of the eve locus, depending on the spatial identity of the activating stripe enhancer. In addition, long-range activation results in transcriptional competition at the endogenous eve locus, causing corresponding developmental defects. Overall, we demonstrate that sustained physical proximity and enhancer-promoter engagement are required for enhancer action, and we provide a path to probe the implications of long-range regulation on cellular fates.