In vitro compartmentalization (IVC) was employed for the first time to select for novel bacteriophage lambda integrase variants displaying significantly enhanced recombination activity on a non-cognate target DNA sequence. These variants displayed up to 9-fold increased recombination activity over the parental enzyme, and one mutant recombined the chosen non-cognate substrate more efficiently than the parental enzyme recombined the wild-type DNA substrate. The in vitro specificity phenotype extended to the intracellular recombination of episomal vectors in HEK293 cells. Surprisingly, mutations conferring the strongest phenotype do not occur in the lambda integrase core-binding domain, which is known to interact directly with cognate target sequences. Instead, they locate to the N-terminal domain which allosterically modulates integrase activity, highlighting a previously unknown role for this domain in directing integrase specificity. The method we describe provides a robust, completely in vitro platform for the development of novel integrase reagent tools for in vitro DNA manipulation and other biotechnological applications.