Regulation of the cellular volume is fundamental for cell survival and function. Deviations from equilibrium trigger dedicated signaling and transcriptional responses that mediate water homeostasis and volume recovery. Cells are densely packed with proteins, and molecular crowding may play an important role in cellular processes. Indeed, increasing molecular crowding has been shown to modify the kinetics of biochemical reactions in vitro; however, the effects of molecular crowding in living cells are mostly unexplored. Here, we report that, in yeast, a sudden reduction in cellular volume, induced by severe osmotic stress, slows down the dynamics of several signaling cascades, including the stress-response pathways required for osmotic adaptation. We show that increasing osmotic compression decreases protein mobility and can eventually lead to a dramatic stalling of several unrelated signaling and cellular processes. The rate of these cellular processes decreased exponentially with protein density when approaching stalling osmotic compression. This suggests that, under compression, the cytoplasm behaves as a soft colloid undergoing a glass transition. Our results shed light on the physical mechanisms that force cells to cope with volume fluctuations to maintain an optimal protein density compatible with cellular functions.