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Design generation, in its essence, is a step-by-step process where designers progressively refine and enhance their work through careful modifications. Despite this fundamental characteristic, existing approaches mainly treat design synthesis as a single-step generation problem, significantly underestimating the inherent complexity of the creative process. To bridge this gap, we propose a novel problem setting called Step-by-step Layered Design Generation, that tasks a machine learning model to generate a design, adhering to a sequence of instructions from a designer. Leveraging the recent advancements in Multi-modal LLMs, we propose SLEDGE: Step-by-step LayEred Design GEnerator to model each update to a design as an atomic layered change over its previous state, while being grounded on the instruction.To complement our new problem setting, we introduce a new evaluation suite, including a dataset and a benchmark. Our exhaustive experimental analysis and comparison with state-of-the-art approaches adapted to our new setup bring out the efficacy of our approach. We hope our work will attract attention to this pragmatic and under-explored research area.