The secreted signaling protein Dpp acts as a morphogen to pattern the anterior-posterior axis of the Drosophila wing. Dpp activity is required in all cells of the developing wing imaginal disc, but the ligand gradient that supports this activity has not been characterized. Here we make use of a biologically active form of Dpp tagged with GFP to examine the ligand gradient. Dpp-GFP forms an unstable extracellular gradient that spreads rapidly in the wing disc. The activity gradient visualized by MAD phosphorylation differs in shape from the ligand gradient. The pMAD gradient adjusted to compartment size when this was experimentally altered. These observations suggest that the Dpp activity gradient may be shaped at the level of receptor activation.