Schizophrenia patients demonstrate perceptual deficits consistent with broad dysfunction in visual context processing. These include poor integration of segments forming visual contours, and reduced visual contrast effects (e.g. weaker orientation-dependent surround suppression, ODSS). Background image context can influence contour perception, as stimuli near the contour affect detection accuracy. Because of ODSS, this contextual modulation depends on the relative orientation between the contour and flanking elements, with parallel flankers impairing contour perception. However in schizophrenia, the impact of abnormal ODSS during contour perception is not clear. It is also unknown whether deficient contour perception marks genetic liability for schizophrenia, or is strictly associated with clinical expression of this disorder. We examined contour detection in 25 adults with schizophrenia, 13 unaffected first-degree biological relatives of schizophrenia patients, and 28 healthy controls. Subjects performed a psychophysics experiment designed to quantify the effect of flanker orientation during contour detection. Overall, patients with schizophrenia showed poorer contour detection performance than relatives or controls. Parallel flankers suppressed and orthogonal flankers enhanced contour detection performance for all groups, but parallel suppression was relatively weaker for schizophrenia patients than healthy controls. Relatives of patients showed equivalent performance with controls. Computational modeling suggested that abnormal contextual modulation in schizophrenia may be explained by suppression that is more broadly tuned for orientation. Abnormal flanker suppression in schizophrenia is consistent with weaker ODSS and/or broader orientation tuning. This work provides the first evidence that such perceptual abnormalities may not be associated with a genetic liability for schizophrenia.