Transcriptional activation of σ(54)-RNA polymerase holoenzyme (σ(54)-RNAP) in bacteria is dependent on a cis-acting DNA element (bacterial enhancer), which recruits the bacterial enhancer-binding protein to contact the holoenzyme via DNA looping. Using a constructive synthetic biology approach, we recapitulated such process of transcriptional activation by recruitment in a reconstituted cell-free system, assembled entirely from a defined number of purified components. We further engineered the bacterial enhancer-binding protein PspF to create an in vitro two-hybrid system (IVT2H), capable of carrying out gene regulation in response to expressed protein interactions. Compared with genetic systems and other in vitro methods, IVT2H not only allows detection of different types of protein interactions in just a few hours without involving cells but also provides a general correlation of the relative binding strength of the protein interaction with the IVT2H signal. Due to its reconstituted nature, IVT2H provides a biochemical assay platform with a clean and defined background. We demonstrated the proof-of-concept of using IVT2H as an alternative assay for high throughput screening of small-molecule inhibitors of protein-protein interaction.