Morphogen gradients pattern tissues and organs during development. When morphogen production is spatially restricted, diffusion and degradation are sufficient to generate sharp concentration gradients. It is less clear how sharp gradients can arise within the source of a broadly expressed morphogen. A recent solution relies on localized production of an inhibitor outside the domain of morphogen production, which effectively redistributes (shuttles) and concentrates the morphogen within its expression domain. Here, we study how a sharp gradient is established without a localized inhibitor, focusing on early dorsoventral patterning of the Drosophila embryo, where an active ligand and its inhibitor are concomitantly generated in a broad ventral domain. Using theory and experiments, we show that a sharp Toll activation gradient is produced through "self-organized shuttling," which dynamically relocalizes inhibitor production to lateral regions, followed by inhibitor-dependent ventral shuttling of the activating ligand Spätzle. Shuttling may represent a general paradigm for patterning early embryos.