Visual stimulation of a region outside the receptive field of single cells in visual cortex often results in the modulation of their responses. The modulatory effects are thought to be mediated through lateral connections within visual cortex. Research on lateral interactions commonly shows suppression. There has been no systematic study of the optimal conditions for facilitation. Here we have studied the nature of the modulation using a new type of compound stimulus: contrast reversal of pattern stimuli made of three discrete grating patches. The middle patch, optimally fitted to the receptive field in orientation, size, and spatial as well as temporal frequencies, was flanked by two similar patches presented well outside the receptive field. We found that (1) both facilitation and suppression occurred often in the same cells, when orientations of the target and flankers matched the receptive-field's optimal orientation; (2) facilitation with collinear flankers occurred most frequently at target contrasts just above the cell's firing threshold and suppression prevailed at high contrasts; (3) facilitative or suppressive modulation was obtained with target-flankers separation of up to 12 deg or more; (4) collinear facilitation was lost when flankers' orientation was rotated by 90 deg, while keeping all other parameters the same; and (5) neither the modulation mode nor the proportion of modulated cells was related to the cell types (simple vs. complex cells) and cells' laminar locations. Here we have provided physiological evidence for contrast-dependent, collinear facilitation probably underlying perceptual grouping in humans.