INTRODUCTION: The relationship between stimulus property, brain activity, and the VEP is still a matter of uncertainty. METHOD: We recorded the VEP of 43 volunteers when viewing a series of dartboard images presented as both a pattern reversing and pattern onset/offset stimulus. Across the dartboard images, the total stimulus area undergoing a luminance contrast change was varied in a graded manner. RESULTS: We confirmed the presence of two independent neural processing stages. The amplitude of VEP components across our pattern reversing stimuli signaled a phasic neural response based on a temporal luminance contrast selective mechanism. The amplitude of VEP components across the pattern onset stimuli signaled both a phasic and a tonic neural response based on a temporal- and spatial luminance contrast selective mechanism respectively. Oscillation frequencies in the VEP suggested modulation of the phasic neural response by feedback from areas of the dorsal stream, while feedback from areas of the ventral stream modulated the tonic neural response. Each processing stage generated a sink and source phase in the VEP. Source localization indicated that during the sink phase electric current density was highest in V1, while during the source phase electric current density was highest in extra-striate cortex. Our model successfully predicted the appearance of the VEP to our images whether presented as a pattern reversing or a pattern onset/offset stimulus. CONCLUSIONS: Focussing on the effects of a phasic and tonic response rather than contrast response function on the VEP, enabled us to develop a theory linking stimulus property, neural activity and the VEP.