Behavioural contrast sensitivity in Octopus tetricus was measured in the range 0.05- 12 cycles per degree (cpd) using a fixation reflex. We show that the contrast sensitivity reaches its maximum (between 1% and 4%) at 0.3 cpd, and decreases to approximately half of the maximum value at the lowest spatial frequency. Reduction of sensitivity at low spatial frequency is a signature of lateral inhibition in visual systems. In vertebrates and insects, lateral inhibition helps to overcome the bottleneck of encoding information into spikes. In octopus, photoreceptors generate spikes themselves and are directly connected to the brain through their axons. Therefore, the neural processing occurring in octopus brain cannot help to overcome the bottleneck of encoding information into spikes. We conclude that, in octopus, the lateral inhibition occurs either in the brain after information has been encoded into spikes, or that photoreceptors inhibit each other. This is the first time behavioural contrast sensitivity has been measured in a cephalopod.