The T cell receptor (TCR) pathway receives, processes, and amplifies the signal from pathogenic antigens to the activation of T cells. Although major components in this pathway have been identified, the knowledge on how individual components cooperate to effectively transduce signals remains limited. Phase separation emerges as a biophysical principle in organizing signaling molecules into liquid-like condensates. Here, we report that phospholipase Cγ1 (PLCγ1) promotes phase separation of LAT, a key adaptor protein in the TCR pathway. PLCγ1 directly cross-links LAT through its two SH2 domains. PLCγ1 also protects LAT from dephosphorylation by the phosphatase CD45 and promotes LAT-dependent ERK activation and SLP76 phosphorylation. Intriguingly, a nonmonotonic effect of PLCγ1 on LAT clustering was discovered. Computer simulations, based on patchy particles, revealed how the cluster size is regulated by protein compositions. Together, these results define a critical function of PLCγ1 in promoting phase separation of the LAT complex and TCR signal transduction.