Unlike in vivo conditions, group II intron ribozymes are known to require high magnesium(II) concentrations ([Mg<jats:sup>2+</jats:sup>]) and high temperatures (42 °C) for folding and catalysis in vitro. A possible explanation for this difference is the highly crowded cellular environment, which can be mimicked in vitro by macromolecular crowding agents. Here, we combined bulk activity assays and single-molecule Förster Resonance Energy Transfer (smFRET) to study the influence of polyethylene glycol (PEG) on catalysis and folding of the ribozyme. Our activity studies reveal that PEG reduces the [Mg<jats:sup>2+</jats:sup>] required, and we found an “optimum” [PEG] that yields maximum activity. smFRET experiments show that the most compact state population, the putative active state, increases with increasing [PEG]. Dynamic transitions between folded states also increase. Therefore, this study shows that optimal molecular crowding concentrations help the ribozyme not only to reach the native fold but also to increase its in vitro activity to approach that in physiological conditions.