How does prolonged reduction in retinal-image contrast affect visual-contrast coding? Recent evidence indicates that some forms of long-term visual deprivation result in compensatory perceptual and neural changes in the adult visual pathway. It has not been established whether changes due to contrast adaptation are best characterized as "contrast gain" or "response gain." We present a theoretical rationale for predicting that adaptation to long-term contrast reduction should result in response gain. To test this hypothesis, normally sighted subjects adapted for four hours by viewing their environment through contrast-reducing goggles. During the adaptation period, the subjects went about their usual daily activities. Subjects' contrast-discrimination thresholds and fMRI BOLD responses in cortical areas V1 and V2 were obtained before and after adaptation. Following adaptation, we observed a significant decrease in contrast-discrimination thresholds, and significant increase in BOLD responses in V1 and V2. The observed interocular transfer of the adaptation effect suggests that the adaptation has a cortical origin. These results reveal a new kind of adaptability of the adult visual cortex, an adjustment in the gain of the contrast-response in the presence of a reduced range of stimulus contrasts, which is consistent with a response-gain mechanism. The adaptation appears to be compensatory, such that the precision of contrast coding is improved for low retinal-image contrasts. © ARVO.