This study determined how contour interaction (the degradation of visual acuity by the presence of nearby contours) is affected by the incessant retinal image motion that occurs in observers with congenital nystagmus (CN). Visual acuity was measured for single, high-contrast, black Landolt Cs, presented without and with flanking bars (contour-to-C separation = 1, 2, 5, or 10 multiples of the gap width of the C). Stimuli were presented against either a white or a black surround. For comparison, acuity was also determined in normal observers, with and without motion of the stimulus to simulate the retinal image motion in jerk CN. The results show that the peak magnitude of contour interaction (the maximal degradation in acuity attributable to contour interaction) is significantly larger in the observers with CN than in normals. When acuity targets are presented against a black surround, contour interaction also occurs over a wider spatial extent in the observers with CN. Imposed image motion increases the extent of contour interaction in normal observers, but not sufficiently to account fully for the results of the observers with CN. We suggest that the additional contour interaction found in observers with CN may be attributable to the presence of amblyopia. For a small contour-to-C separation, contour interaction is significantly greater when stimuli are presented against a black rather than a white surround. Consequently, single-letter acuity may be appreciably underestimated clinically when an adjustable window is used to isolate letters on a projected acuity chart.