We present a distributed algorithm for a swarm of active particles to camouflage in an environment. Each particle is equipped with sensing, computation and communication, allowing the system to take color and gradient information from the environment and self-organize into an appropriate pattern. Current artificial camouflage systems are either limited to static patterns, which are adapted for specific environments, or rely on back-projection, which depend on the viewer's point of view. Inspired by the camouflage abilities of the cuttlefish, we propose a distributed estimation and pattern formation algorithm that allows to quickly adapt to different environments. We present convergence results both in simulation as well as on a swarm of miniature robots "Droplets" for a variety of patterns.