diff --git a/src/squidpy/tl/__init__.py b/src/squidpy/tl/__init__.py
index 6d5abe98..e4e111a7 100644
--- a/src/squidpy/tl/__init__.py
+++ b/src/squidpy/tl/__init__.py
@@ -4,3 +4,4 @@
 
 from squidpy.tl._sliding_window import _calculate_window_corners, sliding_window
 from squidpy.tl._var_by_distance import var_by_distance
+from squidpy.tl._var_embeddings import var_embeddings
diff --git a/src/squidpy/tl/_var_embeddings.py b/src/squidpy/tl/_var_embeddings.py
new file mode 100644
index 00000000..44ae3d2e
--- /dev/null
+++ b/src/squidpy/tl/_var_embeddings.py
@@ -0,0 +1,90 @@
+from __future__ import annotations
+
+from typing import Any, Optional
+
+import numpy as np
+import pandas as pd
+import scanpy as sc
+from anndata import AnnData
+from scanpy import logging as logg
+from spatialdata import SpatialData
+
+from squidpy._docs import d
+
+__all__ = ["var_embeddings"]
+
+
+@d.dedent
+def var_embeddings(
+    sdata: SpatialData,
+    table: str,
+    group: str,
+    design_matrix_key: str = "design_matrix",
+    n_bins: int = 100,
+    include_anchor: bool = False,
+) -> AnnData | pd.DataFrame:
+    """
+    Bin variables by previously calculated distance to an anchor point.
+
+    Parameters
+    ----------
+    %(adata)s
+    table
+        Name of the table in `SpatialData` object.
+    group
+        Annotation column in design matrix, given by `design_matrix_key`, that is used as anchor.
+    design_matrix_key
+        Name of the design matrix saved to `.obsm`.
+    n_bins
+        Number of bins to use for aggregation.
+    include_anchor
+        Whether to include the variable counts belonging to the anchor point in the aggregation.
+    Returns
+    -------
+    Stores binned count matrices in `sdata.tables["var_by_dist_bins"]`.
+    """
+
+    adata = sdata.tables[table]
+
+    if design_matrix_key not in adata.obsm.keys():
+        raise ValueError(f"`.obsm['{design_matrix_key}']` does not exist. Aborting.")
+
+    logg.info("Calculating embeddings for distance aggregations by gene.")
+
+    df = adata.obsm[design_matrix_key].copy()
+    # bin the data by distance
+    df["bins"] = pd.cut(df[group], bins=n_bins)
+    # get median value of each interval
+    df["median_value"] = df["bins"].apply(calculate_median)
+    # turn categorical NaNs into float 0s
+    df["median_value"] = pd.to_numeric(df["median_value"], errors="coerce").fillna(0).astype(float)
+    # get count matrix and add binned distance to each .obs
+    X_df = adata.to_df()
+    X_df["distance"] = df["median_value"]
+    # aggregate the count matrix by the bins
+    aggregated_df = X_df.groupby(["distance"]).sum()
+    # transpose the count matrix
+    result = aggregated_df.T
+    # optionally include or remove variable values for distance 0 (anchor point)
+    start_bin = 0
+    if not include_anchor:
+        result = result.drop(result.columns[0], axis=1)
+        start_bin = 1
+
+    # rename column names for plotting
+    result.columns = range(start_bin, 101)
+    # create genes x genes identity matrix (required for highlighting genes in plot)
+    obs = pd.DataFrame(np.eye(len(result)), columns=result.index)
+    obs.replace(1.0, pd.Series(obs.columns, obs.columns), inplace=True)
+    obs.replace(0.0, "other", inplace=True)
+    obs = obs.astype("category")
+    obs.index = result.index
+    adata_new = AnnData(X=result, obs=obs, var=pd.DataFrame(index=result.columns))
+
+    sdata.tables["var_by_dist_bins"] = adata_new
+
+
+def calculate_median(interval: pd.Interval) -> Any:
+    median = interval.mid
+
+    return median