Replication, heredity, and evolution are characteristic of Life. We and others have postulated that the reconstruction of a synthetic living system in the laboratory will be contingent on the development of a genetic self-replicator capable of undergoing Darwinian evolution. Although DNA-based life dominates, the in vitro reconstitution of an evolving DNA self-replicator has remained challenging. We hereby emulate in liposome compartments the principles according to which life propagates information and evolves. Using two different experimental configurations supporting intermittent or semi-continuous evolution (i.e., with or without DNA extraction, PCR, and re-encapsulation), we demonstrate sustainable replication of a linear DNA template – encoding the DNA polymerase and terminal protein from the Phi29 bacteriophage – expressed in the ‘protein synthesis using recombinant elements’ (PURE) system. The self-replicator can survive across multiple rounds of replication-coupled transcription-translation reactions in liposomes and, within only ten evolution rounds, accumulates mutations conferring a selection advantage. Combined data from next-generation sequencing with reverse engineering of some of the enriched mutations reveal nontrivial and context-dependent effects of the introduced mutations. The present results are foundational to build up genetic complexity in an evolving synthetic cell, as well as to study evolutionary processes in a minimal cell-free system.