The response of V1 neurons to a stimulus placed inside the classical receptive field can be modulated by stimuli presented outside the classical receptive field. However, the specific nature of these contextual modulations is unknown. Both enhancement and suppression have been observed as well as variability across measurement methodologies. To assess whether the contextual effect is facilitative or suppressive, we measured neural responses to an oriented Gabor stimulus ("target") in three conditions: in isolation, with two Gabor flankers that were the same orientation as the target, and with two flankers that were orthogonal to the target orientation. We show that the target-related fMRI response, event-related potential amplitude, and the amount of contrast adaptation are all lower when the flankers were the same orientation compared to both the isolated and orthogonal conditions. There was no evidence of response enhancement. These results all point to an orientation-tuned suppressive effect of contextual stimuli measured in the periphery that is well explained by models incorporating divisive or subtractive inhibition.