Developmental gene expression is often controlled by distal regulatory DNA elements called enhancers. Distant enhancer action is restricted to structural chromosomal domains that are flanked by CTCF-associated boundaries and formed through cohesin chromatin loop extrusion. To better understand how enhancers, genes and CTCF boundaries together form structural domains and control expression, we used a bottom-up approach, building series of active regulatory landscapes in inactive chromatin. We demonstrate here that gene transcription levels and activity over time reduce with increased enhancer distance. The enhancer recruits cohesin to stimulate domain formation and engage flanking CTCF sites in loop formation. It requires cohesin exclusively for the activation of distant genes, not of proximal genes, with nearby CTCF boundaries supporting efficient long-range enhancer action. Our work supports a dual activity model for enhancers: its classic role of stimulating transcription initiation and elongation from target gene promoters and a role of recruiting cohesin for the creation of chromosomal domains, the engagement of CTCF sites in chromatin looping and the activation of distal target genes.