In Drosophila, the NF-kappaB/REL family transcription factor, Dorsal, redistributes from the cytoplasm to nuclei, forming a concentration gradient across the dorsoventral axis of the embryo. Using live imaging techniques in conjunction with embryos expressing a chimeric Dorsal-GFP, we demonstrate that the redistribution of Dorsal from cytoplasm to nucleus is an extremely dynamic process. Nuclear Dorsal concentration changes continuously over time in all nuclei during interphase. While Dorsal appears to be nuclearly localized primarily in ventral nuclei, it is actively shuttling into and out of all nuclei, including nuclei on the dorsal side. Nuclear export is blocked by leptomycin B, a potent inhibitor of Exportin 1 (CRM1)-mediated nuclear export. We have developed a novel in vivo assay revealing the presence of a functional leucine-rich nuclear export signal within the carboxyterminal 44 amino acids of Dorsal. We also find that diffusion of Dorsal is partially constrained to cytoplasmic islands surrounding individual syncitial nuclei. A model is proposed in which the generation and maintenance of the Dorsal gradient is a consequence of an active process involving both restricted long-range diffusion and the balancing of nuclear import with nuclear export.