Electrical potentials evoked in the human brain by visual stimulation can easily be recorded by using electrodes attached to the scalp. It is difficult, however, to relate these visual evoked potentials (VEPs) to specific neural processes: scalp electrodes, far removed from the brain, sum potentials from large areas of cortex. We improved identification and localization of lateral interactions by differentially modulating small neighboring parts of a "windmill-dartboard" stimulus pattern-a central disc surrounded by three contiguous annuli, all radially divided into light and dark segments. With temporal contrast reversal of all segments in the pattern, the major component of the VEP is at the second harmonic of the frequency of modulation--as expected. Temporal contrast reversal of the segments in the central disc and second annulus, with contrast of segments held constant in the first and third annuli, unexpectedly amplifies the VEP at the fundamental frequency of modulation and attenuates it at the second harmonic. Slight spatial separation of static and dynamic zones reduces both the amplification of the fundamental and the attenuation of the second harmonic. Thus, both phenomena appear to result from strong lateral interactions over relatively short distances. Nevertheless, different neural mechanisms must be involved; fundamental and second-harmonic components of the VEP are different functions of spatial separation and relative contrast of the segments in contiguous static and dynamic zones.