Over the past decade, evidence has accumulated that performance in attention, perception, and memory-related tasks are influenced by the distance between the hands and the stimuli (i.e., placing the observer's hands near or far from the stimuli). To account for existing findings, it has recently been proposed that processing of stimuli near the hands is dominated by the magnocellular visual pathway. The present study tests an implication of this hypothesis, whether perceptual grouping is reduced in hands-proximal space. Consistent with previous work on the object-based capture of attention, a benefit for the visual object in the hands-distal condition was observed in the present study. Interestingly, the object-based benefit did not emerge in the hands-proximal condition, suggesting perceptual grouping is impaired near the hands. This change in perceptual grouping processes provides further support for the hypothesis that visual processing near the hands is subject to increased magnocellular processing.