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Morphogens are secreted signalling molecules that disperse from their region of production to form concentration gradients in the adjacent tissue. By inducing cellular responses in a concentration-dependent manner, morphogens organise pattern formation in various tissues. How extracellular protein gradients form has remained controversial, especially in epithelia. In this work, I used a forward-engineering approach to assess the minimal requirements for diffusion-based gradient formation by transforming the otherwise inert green fluorescent protein (GFP) into an in vivo morphogen. I found that, on its own, GFP cannot form a detectable gradient in the Drosophila wing disc, the epithelial pouch that gives rise to the adult wing. However, GFP does form a gradient in the presence of binding partners engineered from anti-GFP nanobodies. The gradient can be formally described by a diffusion-degradation model that considers GFP leakage into the hemolymph, the larval blood, and GFP reentering into the tissue. To test whether GFP gradients can faithfully provide positional information, I substituted GFP for Dpp, a bona fide morphogen, in the presence of Dpp receptors engineered to be responsive to GFP. GFP was able to partially rescue growth and patterning of the wing disc. However, GFP reentering the tissue from the hemolymph seemed to impair the patterning performance of the gradient. While increasing receptor number improved GFP retention, it also reduced the signalling range of the gradient. I found that the coexpression of low-affinity binding partners mimicking extracellular matrix components was able to both increase the gradient range and provide sufficient ligand retention. My results suggest that extracellular protein gradients can form by diffusion in epithelial tissues and that in a system where signalling receptors are the only binding partners, ligand leakage and signalling range are opposing constraints that can, however, be overcome by the coexpression of low-affinity binding partners.