The potent activity of Wnt/Wingless (Wg) signals necessitates sophisticated mechanisms that spatially and temporally regulate their distribution and range of action. The two main receptor components for Wg - Arrow (Arr) and Frizzled 2 (Fz2) - are transcriptionally downregulated by Wg signaling, thus forming gradients that oppose that of Wg. Here, we analyze the relevance of this transcriptional regulation for the formation of the Wg gradient in the Drosophila wing disc by combining in vivo receptor overexpression with an in silico model of Wg receptor interactions. Our experiments show that ubiquitous upregulation of Arr and Fz2 has no significant effects on Wg output, whereas clonal overexpression of these receptors leads to signaling discontinuities that have detrimental phenotypic consequences. These findings are supported by our in silico model for Wg diffusion and signal transduction, which suggests that abrupt changes in receptor levels causes discontinuities in Wg signaling. Furthermore, we identify a 200 bp regulatory element in the arr locus that can account for the Arr gradient, and we show that this is indirectly negatively controlled by Wg activity. Finally, we analyze the role of Frizzled 3 (Fz3) in this system and find that its expression, which is induced by Wg, contributes to the establishment of the Arr and Fz2 gradients through counteracting canonical signaling. Taken together, our results provide a model in which the regulatory network of Wg and the three receptor components account for the range and shape of this prototypical morphogen system.