A gray region can be made to look colored by a colored surround. This phenomenon, chromatic induction, depends on color differences around the boundary of the region. We performed experiments on chromatic induction with small, initially achromatic, targets on nine different colored surrounds ranging in color from blue to red. Using scaling of saturation as our measure of perceived color strength, we found that chromatic induction is at its maximum when the brightness contrast at the boundary between target and surroundings is minimal. This implies that the neural mechanism in the cerebral cortex that mediates the appearance of brightness at a boundary inhibits the activity of chromatic mechanisms at that same boundary. Observers matched the apparent brightness and luminance of each of the colored surrounds. For surround colors where brightness and luminance matches differ, brightness contrast, not luminance contrast, controls chromatic induction. These new findings, taken together with other evidence, require a new theory of color appearance that includes mutually inhibitory interactions between color and brightness mechanisms that are sensing color and brightness contrast at visual boundaries.