  A one dimensional stochastic exclusion process with two species of particles,
$+$ and $-$, is studied where density of each species can fluctuate but the
total particle density is conserved. From the exact stationary state weights we
show that, in the limiting case where density of negative particles vanishes,
the system undergoes a phase separation transition where a macroscopic domain
of vacancies form in front of a single surviving negative particle. We also
show that the phase separated state is associated with a diverging correlation
length for any density and the critical exponents characterizing the behaviour
in this region are different from those at the transition line. The static and
the dynamical critical exponents are obtained from the exact solution and
numerical simulations, respectively.
