Surround enhancement (sensitization) is a poorly understood form of network adaptation in which the kinetics of the responses of retinal neurons to test stimuli become faster, and absolute sensitivity of the responses increases with increasing level of steady, surrounding light. Surround enhancement has been observed in all classes of retinal neurons in lower vertebrates except cones, in some primate retinal ganglion cells, and in human psychophysical studies. In theory, surround enhancement could be mediated by two broad classes of mechanisms, which are not mutually exclusive: one in which the kinetics of the transduction linking cone voltage to postsynaptic current in second-order neurons is modulated, and another in which the transformation of postsynaptic current to membrane voltage is modulated. We report here that both classes of mechanism play a role in surround enhancement measured in turtle horizontal cells (HCs). We stimulated the retina by modulating sinusoidally the illuminance of a bar placed at various positions in the HC receptive field. The bar was surrounded by either equally luminant or dim, steady light. Interpretation of responses in the context of a model for the cone-HC network led to the conclusion that the speeding up of response kinetics —due to selective increase in response gain at high temporal frequencies — by surround illuminance is almost completely accounted for by the change in the kinetics of the transduction linking cone membrane potential to HC postsynaptic current. However, surround illuminance also had an additional, surprising effect on the transformation between postsynaptic current and voltage: the space constant for signal spread in the HC network for the dim-surround condition was roughly twice as large as that for the bright-surround condition. Thus, increasing surround illuminance had analogous effects in the spatial and temporal domains: it restricted the time course and the spatial spread of signal. Both effects were dependent on the contrast between the mean bar illuminance and that of the surround, rather than on overall light level. When the stimulus with the bright surround was dimmed uniformly by a neutral density filter, the space constant did not increase, and response gain at high temporal frequencies did not decrease. Pharmacological experiments performed with dopamine and various agonists and antagonists indicated that, although exogenous dopamine can influence surround enhancement, endogenous dopamine does not play an important role in surround enhancement. We conclude that contrast in background light modulates the spatiotemporal properties of signal processing in the outer retina, and does so by a non-dopaminergic mechanism.