Lateral inhibition is a neurobiological mechanism whereby the boundaries of stimuli are enhanced in the retina and peripheral nervous system, such as touch in the skin. Dendritic trees and interneuron populations, which mediate a mechanism similar to lateral inhibition within the cerebral cortex, are reduced in people with a history of psychosis. The loss of cortical surround inhibition could result in a loss of ‘cognitive definition’, a loss of gain on signalling as it passes from stimulus to perception, memory and action, leading to loosening of associations, reality distortion such as hallucinations and delusions and disorganisation of thought and behaviour.