Biological shapes are often produced by the iterative generation of repeated units. The mechanistic basis of such iteration is an area of intense investigation. Leaf development in the model plant Arabidopsis is one such example where the repeated generation of leaf margin protrusions, termed serrations, is a key feature of final shape. However, the regulatory logic underlying this process is unclear. Here, we use a combination of developmental genetics and computational modeling to show that serration development is the morphological read-out of a spatially distributed regulatory mechanism, which creates interspersed activity peaks of the growth-promoting hormone auxin and the cup-shaped cotyledon2 (CUC2) transcription factor. This mechanism operates at the growing leaf margin via a regulatory module consisting of two feedback loops working in concert. The first loop relates the transport of auxin to its own distribution, via polar membrane localization of the pinformed1 (PIN1) efflux transporter. This loop captures the potential of auxin to generate self-organizing patterns in diverse developmental contexts. In the second loop, CUC2 promotes the generation of PIN1-dependent auxin activity maxima while auxin represses CUC2 expression. This CUC2-dependent loop regulates activity of the conserved auxin efflux module in leaf margins to generate stable serration patterns. Conceptualizing leaf margin development via this mechanism also helps to explain how other developmental regulators influence leaf shape.