Progenitors oppositely polarize WNT activators and inhibitors to orchestrate tissue development.

To spatially co-exist and differentially specify fates within developing tissues, morphogenetic cues must be correctly positioned and interpreted. Here, we investigate mouse hair follicle development to understand how morphogens operate within closely spaced, fate-diverging progenitors. Coupling transcriptomics with genetics, we show that emerging hair progenitors produce both WNTs and WNT inhibitors. Surprisingly, however, instead of generating a negative feedback loop, the signals oppositely polarize, establishing sharp boundaries and consequently a short-range morphogen gradient that we show is essential for three-dimensional pattern formation. By establishing a morphogen gradient at the cellular level, signals become constrained. The progenitor preserves its WNT signaling identity and maintains WNT signaling with underlying mesenchymal neighbors, while its overlying epithelial cells become WNT-restricted. The outcome guarantees emergence of adjacent distinct cell types to pattern the tissue.