In vitro compartmentalization (IVC) was employed for the first time to select for novel bacteriophage λ 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 λ 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.