Observers viewing two superimposed laser interference fringes of nearly equal spatial frequency see an illusory grating of low spatial frequency, even when the spatial frequency of the fringes exceeds the resolution limit. This grating is a product of nonlinear distortion within the visual system (MacLeod, Williams and Makous (1992) Vision Research, 32, 347-363]. By separately manipulating the spatial frequencies of the interference fringes and the distortion gratings, we decomposed the contrast sensitivity function into two serial components separated by the nonlinear process. Losses in the optics of the eye were avoided by use of laser interferometry. Spatial summation preceding the nonlinear stage was restricted to the light-collecting area of individual cones and was directly proportional to the diameters of cone inner segments at three retinal eccentricities; this suggests that light is trapped within cones at the level of their inner segments. Even 30° from the fovea, the nonlinear stage precedes the site where separate signals from individual cones are no longer maintained; this leads us to suggest that the nonlinear process lies within the retina. In addition, spatial antagonism precedes the nonlinear stage; this places the nonlinear process at a site following the outer segments of the cones. Dichoptic presentation of the interference fringes failed to produce illusory gratings; that is, the nonlinearities within the binocular pathway do not produce distortions like those produced by the monocular nonlinearity. © 1993.