Extracellular recordings indicate that mechanisms that control contrast gain of neuronal discharge are found in the retina, thalamus and cortex. In addition, the cortex is able to adapt its contrast response function to match the average local contrast. Here we examine the neuronal mechanism of contrast adaptation by direct intracellular recordings in vivo. Both simple (n = 3) and complex cells (n = 4) show contrast adaptation during intracellular recording. For simple cells, that the amplitude of fluctuations in membrane potential induced by a drifting grating stimulus follows a contrast response relation similar to lateral geniculate relay cells, and does not reflect the high gain and adaptive properties seen in the action potential discharge of the neurons. We found no evidence of significant shunting inhibition that could explain these results. In complex cells there was no change in the mean membrane potential for different contrast stimuli or different states of adaptation, despite marked changes in discharge rate. We use a simplified electronic model to discuss the central features of our results and to explain the disparity between the contrast response functions of the membrane potential and action potential discharge in simple cells.