Sperm contributes essential paternal factors, including the paternal genome, centrosome, and oocyte-activation signals, to sexual reproduction. However, it remains unresolved how sperm contributes its RNA molecules to regulate early embryonic development. Here, we show that the Caenorhabditis elegans paternal protein SPE-11 assembles into granules during meiotic divisions of spermatogenesis and later matures into a perinuclear structure where sperm RNAs localize. We reconstitute an SPE-11 liquid-phase scaffold in vitro and find that SPE-11 condensates incorporate the nematode RNA, which, in turn, promotes SPE-11 phase separation. Loss of SPE-11 does not affect sperm motility or fertilization but causes pleiotropic development defects in early embryos, and spe-11 mutant males reduce mRNA levels of genes crucial for an oocyte-to-embryo transition or embryonic development. These results reveal that SPE-11 undergoes phase separation and associates with sperm RNAs that are delivered to oocytes during fertilization, providing insights into how a paternal protein regulates early embryonic development.