Color vision is spectrally opponent, suggesting that spectrally opponent neurons, such as the horizontal cells in fish and turtle retinae, play a prominent role in color discrimination. In the accompanying paper (Kraaij et al., 1998), it was shown that the output signal of the horizontal cell system to the cones is not at all spectrally opponent. Therefore, a role for the spectrally opponent horizontal cells in color discrimination seems unlikely. In this paper, we propose that the horizontal cells play a prominent role in color constancy and simultaneous color contrast instead of in color discrimination. We have formulated a model of the cone/horizontal cell network based on measurements of the action spectra of the cones and of the feedback signal of the horizontal cell system to the various cone types. The key feature of the model is (1) that feedback is spectrally and spatially very broad and (2) that the gain of the cone synapse strongly depends on the feedback strength. This makes the synaptic gain of the cones strongly dependent on the spectral composition of the surround. Our model, which incorporates many physiological details of the outer retina, displays a behavior that can be interpreted as color constancy and simultaneous color contrast. We propose that the horizontal cell network modulates the cone synaptic gains such that the ratios of the cone outputs become almost invariant with the spectral composition of the global illumination. Therefore, color constancy appears to be coded in the retina.