Vernier acuity determines the relative position of visual features with a precision better than the sampling resolution of cone receptors in the retina. Because Vernier displacement is thought to be mediated by orientation-tuned mechanisms, Vernier acuity is presumed to be processed in striate visual cortex (V1). However, there is considerable evidence suggesting that Vernier acuity is dependent not only on structures in V1 but also on processing in extrastriate cortical regions. Here we used functional magnetic resonance imaging-informed electroencephalogram source imaging to localize the cortical sources of Vernier acuity in observers with normal vision. We measured suprathreshold and near-threshold responses to Vernier onset/offset stimuli at different stages of the visual cortical hierarchy, including V1, hV4, lateral occipital cortex (LOC), and middle temporal cortex (hMT+). These responses were compared with responses to grating on/off stimuli, as well as to stimuli that control for lateral motion in the Vernier task. Our results show that all visual cortical regions of interest (ROIs) responded to both suprathreshold Vernier and grating stimuli. However, thresholds for Vernier displacement (Vernier acuity) were lowest in V1 and LOC compared with hV4 and hMT+, whereas all visual ROIs had identical thresholds for spatial frequency (grating acuity) and for relative motion. The cortical selectivity of sensitivity to Vernier displacement provides strong evidence that LOC, in addition to V1, is involved in Vernier acuity processing. The robust activation of LOC might be related to the sensitivity to the relative position of features, which is common to Vernier displacement and to some kinds of texture segmentation.